Is Starbucks Bailing on Green Mountain?

Starbucks rolls out a BOGO offer on its Keurig K-Cups.

Rick Munarriz
Rick Munarriz
Sep 27, 2012 at 12:00AM
Other

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.


Related Articles

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.