Starbucks finally gets into K-cups

After ending an exclusive deal to supply coffee to Kraft's Tassimo machines, Starbucks partners with Green Mountain.

By Kim Peterson Mar 10, 2011 1:02PM
Credit: (© Toby Talbot/AP)
Caption: A single-serving coffee maker at the Green Mountain Coffee Roasters outlet store in Waterbury, Vt.Starbucks' (SBUX) newest cup size is ultra-small, but no one's complaining. In fact, people have been waiting for this cup for years.

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.

Post continues after video:
"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.
2Comments
Jun 12, 2011 5:30PM
avatar
And what about for those of us consumers who bought the Tassimo specifically to have a Starbucks at home!!!

 the real looser here is the consumer!!!

I will not be following Starbucks to Keurig, I will not be purchasing another $100+ machine only to find out Starbucks will then run to the next big winner in single cup coffee machines!


Burned once  is enough!
Sep 1, 2011 11:39AM
avatar
Well, isn't this just great.

I think Starbucks should sell a "one cup" coffee mix, much the way pre-ground coffee is sold.  You then have a pod maker, whereby you can use the Starbucks coffee for ANY coffee maker.  This whole thing of being locked into a specific pod design is so restrictive to the customer.  I have to wonder if the grinds are prepared a special way... or if not, if it's just an extra fine grind, then somebody should be able to design a pod maker so that you can use ANY coffee beans.
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