Report: Starbucks in talks with single-serve leader

By Reuters
Posted Feb. 14 at 4:13 p.m.

Starbucks Corp. and Green Mountain Coffee Roasters are in partnership negotiations, a source close to the talks told Reuters on Monday, sending Green Mountain shares surging.

Starbucks, the world’s biggest coffee chain, wants to be a big player in theĀ  fast-growing single-serve coffee segment that Green MountainĀ  dominates with its Keurig one-cup brewers.

Starbucks said Sunday that it planned to announce a new product for the single-cup coffee market soon, reviving speculation of a tie-up between the two companies.

The person close to the partnership talks would not say whether the pending announcement would involve Green Mountain.

A Starbucks spokesman declined to comment on the negotiations. Before news of the talks broke, Green Mountain spokeswoman Suzanne DuLong said the company had no comment on speculation around potential partnerships.

Green Mountain shares surged as much as 13.5 percent to a new high of $47.81 before backtracking. Shares, which were briefly halted after Reuters reported the talks, closed up 6.7 percent, to $46.35.

Shares of Starbucks rose 0.7 percent, to $33.58.

Canaccord Genuity analyst Scott Van Winkle said: “Keurig is the dominant brand in single-serve coffee with rapidly rising consumer adoption of its brewers seeding a market opportunity that Starbucks can’t resist.”

On Sunday, Starbucks said it wants to keep all its options open, including partnerships, extensions to its Via instant coffee line or selling single-cup brewing machines.

The news came as Starbucks prepares for the March 1 termination of an agreement by which it provides coffee discs for Kraft Foods Inc.’s Tassimo one-cup home brewer. Starbucks is also ending its grocery distribution agreement with Kraft that day.

Green Mountain enjoys a near monopoly in the single-cup coffee sector — with more than 80 percent market share — and has hammered competition from bigger companies such as Kraft and Sara Lee, which sells the Senseo brewer.

JPMorgan analyst John Ivankoe said in a December note to clients that a single-cup product could easily be a $1 billion revenue opportunity for Starbucks in the U.S. alone.

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