Starbucks finally gets into K-cups
After ending an exclusive deal to supply coffee to Kraft's Tassimo machines, Starbucks partners with Green Mountain.
The company is finally offering its coffee in the single-serve K-cups used by the Keurig machines from Green Mountain Coffee Roasters (GMCR). Investors were ecstatic at the news, sending Green Mountain shares up more than 30% Thursday to $57.09. Starbucks shares rose nearly 8% to $37.23.
For now, it looks like Starbucks has taken the sensible route. Some observers had speculated that the company would debut its own line of single-serve brewers, eating into the market now dominated by Green Mountain.
But instead of opening that can of worms, Starbucks chose to partner with Green Mountain. The Starbucks-branded K-cups should be out this fall.
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"We view this is a big win for Starbucks," a Janney Capital Markets analyst told Reuters. "Starbucks has latched on to the biggest player." Green Mountain has grabbed 80% of the single-cup market, and the Starbucks partnership could help it expand that.
The news wasn't as good for one of Starbucks' competitors, Peet's Coffee & Tea (PEET). Peet's, which isn't yet available for Keurig brewers, saw its shares tumble more than 12% today to $42.18.
Another loser is Kraft (KFT). Starbucks has severed an exclusive deal with Kraft in which it provided coffee for Kraft's Tassimo single-cup brewers. Tassimo was the wrong bet for Starbucks, and the company changed direction quickly.
According to an internal Starbucks memo from chief executive Howard Schultz, 80% of Starbucks customers do not have a single-cup brewer. And only 6% of U.S. households have one, compared with 40% in Germany.
That will change soon, because starting next year Starbucks cafes will start selling Keurig brewers and K-cups.
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