Did Starbucks Just Kill Green Mountain?

The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith and chief technology officer Jeremy Phillips discuss topics across the investing world.

In today's edition, Austin and Jeremy talk about Starbucks' (Nasdaq: SBUX  ) new entrance into the home coffee brewing market. Of course this has huge implications for Keurig device maker Green Mountain Coffee Roasters (Nasdaq: GMCR  ) . However, Starbucks is very careful to point out that Keurig's device is a low-pressure brewer, while Starbucks' new brewer, the Verismo, is a high-pressure brewer. This means the Verismo will be more focused on espressos, cappuccinos, and other speciality beverages. Despite the stated differences in product focus, this seems to be a shot across partner Green Mountain's bow. While current devices are low-pressure brewers, Green Mountain recently announced its own espresso-focused machine, the Vue. Furthermore, the company is partnering with Luigi Lavazza SpA to create a high-pressure capsule system. So while Starbucks' new product isn't direct competition to Green Mountain's current brewers, it's important to see that it is a direct threat to its new model. This puts Starbucks that much closer to nailing Green Mountain's coffin shut.

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Austin Smith has no positions in the stocks mentioned above. Jeremy Phillips has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services recommend Green Mountain Coffee Roasters and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 09, 2012, at 1:17 PM, jeffgrace7 wrote:

    You whole argument is based on the VUE being a high pressure machine, which is certainly not true. Bad reporting! GMCR is already computing with "Verrismo". The specifications can be found here:

    http://www.expressi.com.au/media/1097/expressi-20manual-redu...

    Conclusion: Waste of time listening to and reading this report.

  • Report this Comment On March 10, 2012, at 9:03 PM, TMFBWItime wrote:

    @jeffgrace 7

    Green Mountain's new Vue machine is designed specifically to cater to the cappuccino crowd, similar to Starbuck's new machine.

    Furthermore, Green Mountain is developing a high pressure capsule based system with Luigi Lavazza SpA.

    So, while the VUE isn't a high pressure machine, it brews with a similar focus to Starbucks new machine. On top of that, there is a high-pressure machine in the pipeline. I believe my argument still holds.

    While many claim these companies can cohabitate, the differences between their markets are greying. I think it's more corporate parters putting on a good public face, but these two companies are quickly encroaching on one another.

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