Starbucks takes next big step into single-serve

By Emily Bryson York
Posted March 10 at 10:24 a.m.

Starbucks Coffee Co., the Seattle-based coffee giant, has entered into an agreement with Waterbury, Vt.-based Green Mountain Coffee Roasters for the manufacture, distribution and sale of Starbucks and Tazo tea-branded K-Cups. Green Mountain holds patents on K-Cups, used to make drinks on the Keurig, and owns the single-serve machines.

Starbucks and Tazo K-Cups will be available in grocery and club stores, Starbucks cafes and department stores. Starbucks will also begin selling the Keurig brewers in store.

In so doing, Starbucks makes a big splash in the $2 billion single-serve coffee category,  described as being in the nascent stages. Keurig holds about 70 percent of the brewer market, according to an estimate by Janney Montgomery and Scott. Until last week, Starbucks was tied to an agreement with Northfield-based Kraft Foods and the company’s Tassimo machine. Tassimo has a single-digit share of the market according to Janney.

“Today’s announcement is a win for Starbucks, a win for (Green Mountain) and most importantly a win for consumers who want to enjoy Starbucks coffee with the Keurig Single-Cup Brewing system,” Starbucks CEO Howard Schultz said in a statement. “Our research shows that more than 80 percent of current Starbucks customers in the U.S. do not yet own a single-cup brewer and our relationship will enable Starbucks customers to enjoy perfectly brewed Starbucks — coffee at home, one quality cup at a time.”

Green Mountain is also pushing for more partnerships on its K-Cups. Last month the company announced a similar partnership with Dunkin’ Donuts.

“We are pleased to see Starbucks announce that not only will it sell K-Cups within its thousands of retail stores — stores which arguably boast the highest customer frequency of any retailer of size in the U.S. — but also in multiple other retail channels,” Janney analyst Mark Kalinowski wrote in a research note.  “To us, this signals that Starbucks won’t act cautiously with the Starbucks’ brand K-Cups — it will boldly enter the market in a meaningful way, making an assertive push to place product.”

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