Is Starbucks Bailing on Green Mountain?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR  ) fell nearly 14% last week after Starbucks (Nasdaq: SBUX  ) began selling its Verismo coffeemaker online.

Now there's a surprising sale on Starbucks K-Cups.

Between now and Sunday, Starbucks will be selling two of its 12-count K-Cup boxes for the price of one.

The in-store promotion is an intriguing move. Starbucks inked a deal with Green Mountain last year to make it the exclusive brand of "super-premium" K-Cups. Is this surprising sale that makes Starbucks K-Cups temporarily cheaper than most of the lesser K-Cup brands a move to clear out inventory ahead of the Verismo in-store rollout? Is this a reaction to the incoming deluge of cheaper K-Cups from private-label specialists now that Green Mountain's patents have run out?

The timing is still odd. Starbucks is trying to drum up interest in its Verismo machine, and the pricey pods that provide single servings of espresso, latte, and brewed coffee. Starbucks has argued that the vast majority of its customers do not own a Keurig or any of the more expensive one-cup brewers. Isn't it communicating -- through this four-day sale -- that Keurig is a better deal than its own Verismo?

Sure, Keurig machines don't make the fancy espresso and caffe latte beverages that Starbucks customers -- and Verismo buyers -- crave. However, the expiration of the two primary K-Cup patents earlier this month may be a mixed blessing for Green Mountain if its widens the divide between the cost of K-Cups and the pricier pods being used in espresso-centric machines.

We will see how this all plays out.

Starbucks has a multiyear deal in place to support Keurig and even the recent Keurig VUE. It remains to be seen if Starbucks will support the next Green Mountain machine, a Verismo-like platform made in cahoots with Italy's Lavazza. However, it will be interesting to see the kind of in-store support that Keurig will be getting once Verismo machines and pods hit actual Starbucks stores.

Dunkin' Brands (Nasdaq: DNKN  ) has no problem selling its own K-Cups at its Dunkin' Donuts shops, but Dunkin' doesn't seem to have an interest in following Starbucks into brewing hardware and ecosystems.

Starbucks will undoubtedly grow as a retail environment as Verismo picks up steam, but where will that leave support for Green Mountain's K-Cup ecosystem? Let's see what Starbucks has up its sleeve after this week's BOGO offer. 

Brew ha ha
If you want to learn more about how the Keurig champ will fare as the coffee wars heat up, our analysts have compiled a special premium report on Green Mountain, exploring the challenges and opportunities the company faces. A free year of updates is included, so take advantage of our research and get up to speed on the java heavy: Click here now.

The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a bear put spread position in Green Mountain Coffee Roasters and writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he brews them. He does not own shares in any of the stocks in this story, except for Green Mountain. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2034167, ~/Articles/ArticleHandler.aspx, 10/27/2016 11:10:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,203.79 4.46 0.02%
S&P 500 2,135.01 -4.42 -0.21%
NASD 5,237.33 -12.94 -0.25%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 10:55 AM
DNKN $47.96 Up +0.09 +0.19%
Dunkin' Brands Gro… CAPS Rating: ***
GMCR.DL $0.00 Down +0.00 +0.00%
Keurig Green Mount… CAPS Rating: **
SBUX $53.26 Down -0.38 -0.70%
Starbucks CAPS Rating: ****