Starbucks Corp. (SBUX) and Green Mountain Coffee Roasters Inc.
(GMCR) have extended for a minimum of five years their agreement to
make and sell Starbucks- and Tazo-branded beverage pods for use in
Green Mountain's Keurig single-serve brewing systems.
The extension is a vindication of sorts for Green Mountain,
which had been criticized by hedge fund manager David Einhorn in
late 2011 for developing a system reliant on expiring patents. Mr.
Einhorn argued that the loss of patent protection would lead to
cheaper, private-label knock-offs that would fit into the Keurig
machines, thus detracting from the branded coffee pods.
Starbucks and Green Mountain first entered into a partnership in
March 2011. Starbucks has since shipped more than 850 million
Starbucks coffee K-Cup packs.
Under the new agreement, Starbucks will add brands for use in
the standard Keurig machines as well as for the new Keurig Vue
machines, which can make a wider assortment of hot and cold
beverages. New Starbucks brands that will be added to the brewing
systems will include Seattle's Best Coffee, Torrefazione Italia
coffee, Teavana Teas and Starbucks Cocoa.
The new agreement "strengthens our leadership position in the
premium single cup category, the segment of our industry that has
grown nine times faster than the overall coffee category during the
past year and a category that now accounts for more than 25% of
total coffee sales in grocery," Starbucks Chief Executive Howard
Schultz said in a statement.
Green Mountain plans to broaden the reach of Keurig to more
markets beyond North America, Green Mountain Chief Executive Brian
Kelley stated. Financial terms of the agreement were not
disclosed.
Write to Julie Jargon at julie.jargon@wsj.com
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