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.
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.
Copyright © 2014 Microsoft. All rights reserved.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.