Starbucks & Green Mountain Are Still a Team

A new deal ensures that Starbucks' K-Cups will be compatible with GMCR's enhanced machines

   

starbucks lit sign 630 flickr 300x225 Starbucks & Green Mountain Are Still a TeamRemember that rather aggressive shot across the bow Starbucks (NASDAQ:SBUX) launched on Green Mountain Coffee Roasters (NASDAQ:GMCR) a couple of weeks ago? Well, it looks like there are no hard feelings.

Yesterday, the competitors came together to announce a joint effort: Starbucks’ single-serving coffee packs will be compatible with Green Mountain’s newest coffee machine, the Vue.

This follows earlier news that SBUX will be introducing a direct competitor to the Keurig system, the Verismo machine, which coffee drinkers can use at home or work to brew espresso beverages one at a time. Fun fact: The word “verismo” comes from the Italian word meaning “true” and was an Italian literary movement in the late 19th century.

This isn’t the first time the two companies have worked together. About a year ago, SBUX said it would sell versions of its single-cup coffee and Tazo tea products to work with the Keurig/K-Cup system. In the first quarter alone, SBUX shipped more than 100 million K-Cups, generating $335 million in revenue, to become the second-highest revenue producer for the Seattle-based company.

And while SBUX is excited about its new Verismo technology, which will be available this fall, it also remains committed to keeping its GMCR partnership up and running.

This is the java-based equivalent of the Tom Hanks and Meg Ryan characters in You’ve Got Mail. If only Hanks’s Joe Fox had let Ryan’s Kathleen in on, say, a percentage of his megastore’s children’s-book business. But the character didn’t do that — and it turned out he was in love with his rival! So why is Starbucks keeping the peace?

For one thing, plenty of offices and private homes already have a Green Mountain Coffee system in place, and Starbucks doesn’t want to lose out on the revenue it generates supplying those refills. To keep this existing cow churning out cash, Starbucks likely had to agree to make a deal around Green Mountain’s newer technologies. The Vue is reported to have enhanced brewing technology to make its coffee stronger and hotter.

Whatever Starbucks’ motive, the deal was seen by Green Mountain shareholders as good news. The stock closed about 10% higher on Wednesday and is working on filling the bear gap created on March 9 when Starbucks made its Verismo announcement — GMCR subsequently lost 16% in a single-session drubbing.

Starbucks, meanwhile, close fractionally higher in Wednesday’s trading. See how everyone can win if we all agree to work together?

As of this writing, Beth Gaston Moon own shares in Green Mountain Coffee Roasters. 


Article printed from InvestorPlace Media, http://investorplace.com/2012/03/starbucks-green-mountain-are-still-a-team/.

©2014 InvestorPlace Media, LLC

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