Starbucks Confident In K-Cups Sales For Green Mountain Brewers

Date : 05/04/2012 @ 1:33PM
Source : Dow Jones News
Stock : (MM) (GMCR)
Quote : 91.67  0.0 (0.00%) @ 2:05AM

Starbucks Confident In K-Cups Sales For Green Mountain Brewers

Starbucks Corp. (MM) (NASDAQ:SBUX)
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Starbucks Corp. (SBUX) says it's seeing strong sales of its K-cup portion packs for Keurig single-serve coffee brewers, even though Keurig's parent company, Green Mountain Coffee Roasters (GMCR), has seen an unexpected deceleration of sales growth lately.

Starbucks Chief Executive Officer Howard Schultz sent an e-mail to employees Thursday, reassuring them that "Starbucks K-Cups continue to see robust gains," and that "Starbucks' relationship with Green Mountain remains as strong as ever."

The e-mail came as Green Mountain's shares tanked 48% Thursday after it reported its latest quarterly earnings. Green Mountain's lower-than-expected sales and excess inventory weighed on its profit last quarter and deflated investor confidence in the long-term potential of the company.

Schultz said that while he can't comment on Green Mountain's performance, the single-serve coffee market remains a major focus for Starbucks. It will even begin selling two new varieties of K-cups in grocery stores "in the coming months," Schultz said in the e-mail.

Seattle-based Starbucks has shipped more than 230 million K-Cups since it began selling the pods at supermarkets and retailers last year. The company also plans to begin selling its own single-serve espresso brewer and pods this fall, and continues to see strong sales of its Via Readybrew single-cup line.

It's possible that the entrance of Starbucks as a new premium brand of K-cups is stealing sales from other K-cup providers.

Late Thursday, Caribou Coffee (CBOU) said it has seen a slowdown in sales growth of its branded K-cups, leading it to lower its earnings forecast for the year. But Caribou attributed the lower sales to a broader pull-back in the single-serve market. "Recent industry trends lead us to believe this business line will experience a moderation in its growth trajectory for the remainder of 2012," said Caribou Chief Executive Michael Tattersfield. It's stock is down 19% in Friday trading.

Though Starbucks' K-cups are slightly more expensive than Caribou's, Starbucks has had no trouble attracting customers in its cafes either, despite higher prices and the continuing struggling economy.

News of Schultz's e-mail was reported earlier by Bloomberg News.

Starbucks shares were down 2% to $55.41 -- in line with the broader market's moves Friday, but the stock has still climbed more than 20% so far this year.

Schultz also commented on the ongoing turnaround efforts of Starbucks in Europe, after the Europe, Middle East and Africa division reported a net loss last quarter. "These are still early days, but we have the right plan and the right people in place," Schultz said, adding that recent sales of lattes are up significantly.

-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@dowjones.com

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