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UPDATE 4-Kraft to sell Maxwell House K-cups for Keurig

Thursday, 11 Oct 2012 | 4:24 PM ET

* Kraft will not pay royalties to Green Mountain

* Maxwell House to sell unlicensed Keurig-style cups

* Green Mountain stock falls, recovers

(Adds comments from Green Mountain, graphic)

By Martinne Geller

NEW YORK, Oct 11 (Reuters) - Kraft Foods Group Inc plans to sell Maxwell House and Gevalia single-serve coffee pods compatible with Keurig brewing systems, in another blow to Keurig parent Green Mountain Coffee Roasters Inc .

The pods are not licensed by Keurig or affiliated in any way, Kraft spokesman Basil Maglaris told Reuters. That means that Green Mountain will not receive any royalties from their sale.

The move by Kraft, which also owns the rival Tassimo single-serve brewer, represents the first time a big-name coffee brand has skirted Green Mountain in making cups for its market-leading system. Certain Green Mountain patents related to the design of its K-Cups expired in September, paving the way for a wave of competitors.

For its part, Green Mountain says consumers trust the official Keurig seal.

"We believe Green Mountain and the Keurig brand are very well-positioned to continue our industry leadership by revolutionizing the way consumers prepare and enjoy quality specialty coffee and other beverages," said Suzanne DuLong of Green Mountain.

Maxwell House is the third-largest retail coffee brand in the United States behind No. 1 Folgers, which is owned by J.M. Smucker Co , and No. 2 Starbucks , according to market research firm Euromonitor International.

For a graphic showing companies' market shares: .

The news was not unexpected, and Green Mountain shares recovered after initially falling. They finished regular trading on Thursday up 0.9 percent at $22.27.

Kraft's action - along with similar launches of private label brands including Kroger Co , Safeway Inc and Supervalu Inc - adds more weight to questions raised last year by Greenlight Capital's David Einhorn about the sustainability of Green Mountain's dominance in the single-serve market. Einhorn publicly disclosed a short position in the company a year ago.

In addition to the new K-cups, Green Mountain is facing new competitors to its coffee brewers from the likes of Bunn and Starbucks.

Starbucks and Dunkin Brands Group Inc's Dunkin Donuts also sell cups for Keurig, but they are licensed.

Kraft's Maglaris said he expects the K-cups to be on U.S. retail shelves sometime in the next several months.

Kraft also manufactures the Tassimo single-serve coffee system. Maglaris could not say whether the Keurig cups would cannibalize sales of single-serve discs used in Tassimo machines.

Kraft shares rose 0.2 percent to $46.46 in regular trading on Thursday.

(Additional reporting by Brad Dorfman in Chicago; Editing by Gerald E. McCormick, Matthew Lewis, Gunna Dickson and Steve Orlofsky)

((martinne.geller@thomsonreuters.com; 646 223-6023; Reuters Messaging: martinne.geller.reuters.com@reuters.net))

Keywords: KRAFT KEURIG/

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