Starbucks to sell single-serve coffee brewers

Thu Mar 8, 2012 10:13pm EST
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By Lisa Baertlein

DETROIT (Reuters) - Starbucks Corp (SBUX.O: Quote) said it will launch its own single-cup coffee and espresso drink machine later this year, putting it in direct competition with partner Green Mountain Coffee Roasters Inc GMCR.O, seller of the popular Keurig home brewers.

Shares of Green Mountain plunged as much as 24 percent in after-hours trade, but regained some ground after Starbucks said on a conference call that it would continue to supply Green Mountain with Starbucks-branded single-serve coffee pods called K-cups. Starbucks shares rose 3 percent to $51.87.

The world's biggest coffee chain, whose "Verismo system by Starbucks" will make both brewed coffee and espresso beverages such as lattes, is the latest player to beef up its presence in the fast-growing single-serve coffee market dominated by Green Mountain's Keurig brewer in the United States and Nestle SA NESN.VX around the world.

"With Green Mountain's patents expiring this fall, Starbucks' entry is part of the competitive onslaught hitting Green Mountain," said hedge fund manager David Einhorn, who has been one of the most outspoken critics of Green Mountain.

Green Mountain did not immediately respond to requests for comment on the Starbucks announcement.

Companies like Sara Lee SLE.N and Nestle NESN.VX have recently indicated they are ready to ramp up their presence in single-cup coffee. Even the world's largest retailer Wal-Mart Stores Inc (WMT.N: Quote) said it would add the relatively unknown Esio Beverage System to its shelves.

The increased competition comes during a year when Green Mountain's patents covering its coffee packs called K-Cup are due to expire. The patent expiry may allow other companies to sell coffee on the Keurig machines without paying royalty to Green Mountain.

Last month, Green Mountain said it would sell a premium line of Keurig brewers called the "Vue" to help fend off increased competition. Starbucks' proposed premium line of machines may be a direct rival to the Vue which is priced at about $250.   Continued...

An empty cup is left on a table outside a Starbucks coffee shop in London December 1, 2011. REUTERS/Luke MacGregor