Starbucks expands partnership with Green Mountain

The companies are going to compete and work together at the same time.

By Kim Peterson Mar 21, 2012 1:17PM
Image: Coffee (© HD Connelly/Getty Images/Getty Images)Starbucks (SBUX) and Green Mountain Coffee Roasters (GMCR) will continue to be frenemies after all.

The companies are expanding their partnership to produce Starbucks coffee packs for Green Mountain's fancy new Vue machines.

The relationship took a hit recently after Starbucks announced it was developing its own single-serve espresso machine. The Verismo, expected to debut before Christmas, will brew coffee and make cappuccinos and other espresso drinks. Investors knew exactly who the biggie was in this battle, and they sent Green Mountain shares tumbling.

The following video has some analyst reaction to Starbucks' Verismo announcement.

Post continues below.
Starbucks CEO Howard Schultz tried to convince the market that the two companies could still be partners -- and Wednesday's announcement backs him up. Starbucks had already made coffee for Green Mountain's Keurig single-cup machines, and the Vue deal was an expansion of that partnership.

Green Mountain investors were ecstatic at the news Wednesday, sending shares up more than 11% to $56.50. Starbucks shares were flat at just under $54.

The Vue allows for more customized drinks in 11 sizes and features temperature control. Users have options for tea, hot cocoa and iced drinks. It will sell for $249.99 -- more than double the price of the Keurig Elite brewer. Starbucks hasn't said how much the Verismo will cost.

Optimistic Green Mountain investors say there is plenty of room in this nascent market for Starbucks. Green Mountain will continue to promote its machines as all-around beverage makers that can handle tea, cocoa and various types of coffee. Starbucks appears to be targeting a higher-end audience with its high-pressure espresso brewer.

For now, it appears that both companies are going to compete and work together at the same time.

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