Did Starbucks blunder with the Verismo?

The company is already marking down its new home brewing machines. Sign of slow sales or smart holiday retailing?

By Kim Peterson Dec 17, 2012 9:42AM
A Starbucks Corp., sign is displayed outside a coffee shop in London, U.K. / Chris Ratcliffe/Bloomberg via Getty ImagesStarbucks (SBUX) launched its Verismo home brewing machine this fall to great anticipation. Investors thought the machine would become a serious threat to the brewers from Green Mountain Coffee Roasters (GMCR), whose Keurig machine was a pioneer in the single-cup coffee realm.

But now, smack in the middle of the holiday season Starbucks hoped to pounce on, there are signs the company's brewer isn't living up to expectations.

Perhaps most telling is the price itself. Starbucks is already discounting the machines on its website, dropping the price to $149 from $199 for the Verismo 580 brewer and to $299 from $399 for the fancier Verismo V-585.

Is this an indication of slowing sales, or is Starbucks just pricing aggressively to attract holiday buyers?

The subject came up at the Starbucks Gossip, an online discussion site for baristas and customers. "I love the espresso this thing makes, but I can buy an actual espresso machine for less than $150, even," wrote someone who appeared to be a barista on the site. "People don't frequently buy (the Verismo) but they're curious," wrote another.

Two others who appeared to be baristas were more enthusiastic about sales, with one reporting sales of 32 machines in store.

Perhaps one problem dragging down Verismo sales is that they're harder to find than Green Mountain's rival machines. Starbucks has worked out deals to sell the machines in Williams-Sonoma and Sur La Table stores. The Costco (COST) in my neighborhood prominently displays the Keurig brewer and the coffee pods that go with them, but it doesn't sell the Verismo.

Before the Verismo launched, Green Mountain had about 90% of the U.S. single-cup market with the Keurig, The Wall Street Journal reports. Will Starbucks be able to make a meaningful dent in that lead?

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