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Starbucks, Green Mountain in single-cup deal

March 10, 2011|By Melissa Allison

Reporting from Seattle— — After weeks of speculation about whether Starbucks Corp. would buy Green Mountain Coffee Roasters Inc., the companies Thursday announced something short of an acquisition.

Starbucks will put its coffee and tea into single-serve pods that fit into Green Mountain's popular Keurig brewing machines, as Tully's Coffee and other roasters have done for years. Until now, Starbucks made single-serve discs solely for a brewing system marketed by Kraft Foods Inc., with which Starbucks has parted ways.

Starbucks also will sell the Keurig machines — which cost roughly $100 to $250 — in its stores.

Green Mountain investors were thrilled, sending shares soaring after having had their hopes of an acquisition dashed weeks ago when Starbucks issued a release saying that just having a patent did not ensure the Vermont company's continued primacy in the $2-billion single-serve category. Green Mountain shares jumped $18.07, or 41.4%, to $61.71. Starbucks rose $3.43, or 9.9%, to $37.97.

One analyst suggested Starbucks was playing games with that release.

"We are amused at the public battles Starbucks finds the need to wage when it cannot get its way in private negotiations," wrote Janney Capital Markets analyst Mitchell Pinheiro, who covers Green Mountain but not Starbucks.

Fewer than 20% of Starbucks' U.S. customers own a single-cup brewer, Starbucks said.

It is unclear whether other brands of coffee will continue to be offered for Keurig brewers.

"Starbucks is the exclusive, licensed super-premium coffee brand produced by [Green Mountain] for the Keurig Single-Cup brewing system," the release said.

David Tarantino, a Peet's Coffee analyst with Robert W. Baird, wrote to clients that the Starbucks-Green Mountain agreement appears to lock Peet's out of doing a deal with Green Mountain. Now Peet's will have to find another partner or wait until the Keurig system's patents expire, he wrote, which could be in late 2012.

Allison writes for the Seattle Times/McClatchy.

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