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Despite the swirling rumors above Starbucks' (Nasdaq: SBUX ) new strategies for the single-serve coffee market, any real proof that the java giant will partner with archrival Green Mountain Coffee Roasters (Nasdaq: GMCR ) remains elusive.
Instead, Starbucks announced today that it will provide ground coffee "filter packs" to Courtesy Products, which makes the CV1 single-serving brewers used in hotel rooms. The partnership gives Starbucks entry into about 500,000 "luxury and premium" hotel rooms.
Green Mountain's Keurig brewer, which uses the company's proprietary K-Cups, dominates a large swath of the single-serving coffee market. NPD market research found that at the end of fiscal 2010, Green Mountain could boast having the top four best-selling coffee makers. Green Mountain not only provides its brewers to regular consumers, but also targets the hospitality sector.
In addition to distributing its own coffee, Green Mountain also has exclusive licensing agreements to provide K-Cups featuring coffee and tea from companies such as Newman's Own Organics, Hain Celestial's (Nasdaq: HAIN ) Celestial Seasonings, Caribou (Nasdaq: CBOU ) , Gloria Jean's, and others. It also has agreements through which it provides K-Cups for caffeinated rivals such as J.M. Smucker (NYSE: SJM ) , the name behind coffee brands like Folgers and Millstone.
The theory that Green Mountain and Starbucks might be poised to partner up isn't outlandish. Starbucks would benefit from another distribution channel for its coffee (and more potential fans for its brand), while a K-Cup partnership would also encourage loyalty and further adoption of Green Mountain's Keurig brewers.
Regardless, Green Mountain represents a major Starbucks competitor. Consumers who use Keurig brewers at home may very well be less likely to stop into Starbucks for a single drink. Meanwhile, Starbucks provides Via instant coffee packets, which have been a huge hit for the coffee giant and can already be considered a solid competitive answer to single-serve, at-home brewers.
However much headlines may clamor for a partnership between Starbucks and Green Mountain, it seems to me that these particular companies might prefer to exist as enemies than strange bedfellows. That said, if Starbucks decides to try to make its own single-serve brewers, its late entry into the marketplace could leave the company and its shareholders burnt and bitter.
Does a partnership between these two major coffee purveyors make perfect sense, or is it just crazy talk? Add your two cents in the comments box below.