Starbucks to launch at-home brewer

The company plans to sell the Verismo this fall, and says it will maintain a relationship with Green Mountain Coffee Roasters.

By Kim Peterson Mar 8, 2012 12:55PM
Credit: © 2012 Starbucks Corporation
 
Caption: Verismo® System by Starbucks, A New Premium Single Cup Solution for At-Home Espresso and Coffee BeveragesUpdated 5:35 p.m. ET

Starbucks
(SBUX) is jumping into the single-cup brewing market, preparing to launch a home-based machine called Verismo.

The machine (pictured) is slated to launch this fall at specialty stores, at some Starbucks cafes and online. It's a direct hit at the single-cup brewers made popular by Green Mountain Coffee Roasters (GMCR).

In a webcast Thursday afternoon, CEO Howard Schultz said Verismo will differ from Green Mountain's Keurig machines. Verismo was created to make espresso drinks using high pressure, he said, and will be able to handle milk-based pods. Verismo can make lattes, cappucinos and other espresso-based beverages, while the Keurig just brews coffee.

Starbucks isn't yet saying how much Verismo will cost.

Starbucks hinted at an announcement in this area Thursday morning, causing Green Mountain shares to close down more than 2% to $62.40. Shares plunged 15% in after-hours trading after Starbucks unveiled Verismo. Starbucks shares closed up nearly 2% to $50.37 and rose another 3% in after-hours trading.

Schultz stressed that Starbucks wanted to maintain its positive working relationship with Green Mountain. The two companies partnered last year to produce Starbucks-branded K-cup pods for Keurig brewers.

"The relationship with Green Mountain is as solid today as it was when we began," Schultz said in the webcast. "We've been in contact with them, the relationship is transparent and we are a supporter of the system. We believe that the category is still in its very nascent stage."

Starbucks is developing the Verismo machine with Krueger GmbH & Co. KG, a privately-held German company. Starbucks will market and sell the machine exclusively with its own coffee and milk pods. It will not include coffee from other producers at launch, but may add others down the road, Schultz said.

The premium single-cup segment is the fastest-growing business in coffee right now, Starbucks executives said. It's a nearly $8 million category.

Starbucks is positioning the Verismo to debut just in time for the holiday season -- a period in which 50% of single-cup brewing machine sales occur.

Executives raved about the milk pods that will come with Verismo. "It tastes like fresh milk," one said. "That's one of the biggest breakthroughs in this system." Keurig's K-cup coffee pods are designed for low-pressure machines and are not compatible with the high-pressure Verismo, Starbucks said.

Rumors were rampant last year that Starbucks would debut its own single-cup brewer. The company's research showed that at least 80% of Starbucks customers didn't have a brewer, Schultz said last March.

Starbucks struck its own deal with Green Mountain to make Starbucks coffee available in the K-cup packs for Keurig brewers. That partnership already appears lucrative for both sides. Starbucks-brand K-cups are a hit at Costco (COST) and other retailers.

Green Mountain isn't sitting still. It's working on a new line of single-serve machines called the Vue. Priced at $250, the Vue has far more brewing and customization options, including separate dairy packs to add foam to beverages, The Wall Street Journal reports.
7Comments
Mar 8, 2012 7:14PM
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Hey Starbucks make sure you manufacture it in America.
Mar 8, 2012 8:31PM
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Is Starbucks trying to drive customers away from their own stores? What do their 'licensed' store owners or (partners) do to compensate for their lost revenue?
Get ready for a large....(or whatever goofy name they call large).....coffee to be $5.00!
Mar 8, 2012 7:18PM
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...and fill the landfills with non compost able K-Krap!
Mar 8, 2012 8:24PM
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Is Starbucks trying to drive customers away from their own stores?
What do their 'licensed' store owners or (partners) do to compensate for their lost revenue?

Mar 8, 2012 1:34PM
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This news will actually benefit Green Mountain!!!
Mar 8, 2012 8:03PM
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This is great....now we can all enjoy mud-tasting starbucks one cup at a time.
Stick to what you know, starsux.......serving over-priced tar in your annoying/pretentious stores!

Mar 8, 2012 8:05PM
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sounds like they are ripping of the Tassimo machines.  They use to make the pods to use in them and then withdrew them and now conveniently are 'launching' their own?!?!  Sounds just like the Tassimo

 

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