Starbucks to Triple Products for GMCR's Keurig

New deal to last at least five years.

Kevin Chen
Kevin Chen
May 9, 2013 at 10:24AM
Consumer Goods
Starbucks (NASDAQ:SBUX) and Green Mountain Coffee Roasters (UNKNOWN:GMCR.DL)have agreed to expand their current manufacturing, marketing, sale, and distribution partnership relating to Starbucks- and Tazo-branded single-serve packs (K-Cups) worldwide.
The K-Cups will be for use in GMCR's Keurig single-serve brewing systems. Shares of GMCR soared after it posted blowout earnings and announced the expanded K-Cup distribution deal with Starbucks yesterday.
Within the new, minimum five-year deal, Starbucks will triple the number of Starbucks products on the Keurig platform. In addition to the current Starbucks K-Cup and Vue pack portfolio, GMCR will handle Starbucks brands like Seattle's Best, Torrefazione Italia coffee, Teavana Teas, and Starbucks Cocoa.
Since Starbucks and GMCR first partnered in March 2011, Starbucks has shipped more than 850 million Starbucks coffee K-Cup packs. Comparing March 2013 sales to the previous year, the company says Starbucks K-Cups sales have increased more than 75%.
Additionally, last month Information Resources -- a market research company focused on the consumer packaged goods and retail industries -- said Starbucks K-Cup packs were one of the top 10 launches of 2012.
Starbucks CEO Howard Schultz noted the move to expand Starbucks K-Cup and Vue products beyond North America and market them globally. He was quoted as saying that sales in the premium single-cup category outpaced the growth of the overall coffee market by 9 times last year and that the segment accounts for more than 25% of total grocery-coffee sales. He said the agreement is a "win-win-win" for both companies and coffee drinkers. 
Financial details were not disclosed.