Safeway launches 5 store brand coffees for Keurig

Tue Jun 12, 2012 6:53pm EDT
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By Martinne Geller

(Reuters) - Safeway Inc SWY.N launched under its own store brand five types of filtered coffee pods compatible with Keurig brewers but cheaper than those sold by ailing Green Mountain Coffee Roasters Inc GMCR.O, whose dominance in that market is being threatened.

Green Mountain, once a Wall Street high-flyer whose shares have taken a nose dive, sells the Keurig brewers but makes most of its profits from the "K-Cups" that go with them. New entrants to the market, especially ones priced below Green Mountain's K-Cups, could pressure prices and grab market share, say some analysts and investors.

A Safeway store in Petaluma, California on Tuesday had on its shelves five varieties of Safeway Select coffee for use with Keurig machines. They were Breakfast Blend, French Roast, Costa Rica, Hazelnut and Sumatra varieties, selling in packs of 12 for $6.99. The regular price for most of the other K-Cups is around $8.99, though they sometimes go on sale.

The new Safeway products differ from existing private label pods for Keurig in that they are filtered coffee. The products launched in January, two cappuccino-flavored drinks and one hot cocoa drink, were instant, Safeway spokesman Brian Dowling told Reuters in an email.

Safeway told Reuters about the coffee on Tuesday, days after rival chain Kroger Co (KR.N: Quote) said it was launching store-branded coffee pods for the Keurig machine. That sent Green Mountain shares down as much as 10 percent to a 2-1/2-year low on Monday.

Green Mountain shares closed down 0.2 percent at $21.27 on Tuesday after falling as low as $20.72, a new 52-week low. Before the news from Safeway they had been up slightly.

Green Mountain shares have tumbled more than 80 percent since September, due to questions about its business strategy and growth trajectory, management and accounting practices. It has been targeted by short-sellers, who have bet on the shares falling.

In addition to its own Green Mountain coffee brand, it sells Starbucks (SBUX.O: Quote), Folgers (SJM.N: Quote), and Dunkin Donuts (DNKN.O: Quote) K-Cups, among others, through licensing agreements.   Continued...