As Starbucks gets closer to announcing a single-serve coffee, investors are trying to figure out which company Starbucks will partner with.
Lots of opinions, and on Monday afternoon the story got a new twist when Reuters reported that a source close to the talks said the two companies have been in “ongoing partnership negotiations.”
Never mind that "ongoing negotiations" can mean merely that they've been talking, as would be expected, given Green Mountain's single-serve dominance with its so-called K-Cup coffee pods. The news, toward the end of the trading day, juiced Green Mountain’s stock—causing it to jump more than 6 percent to a new all-time high after being down much of the day.
The slide appeared to be based on uncertainty about whether Starbucks will partnership with Green Mountain or somebody else. The speculation was sparked by a weekend story in the Chicago Tribune that said Starbucks was close to announcing its plans for a single-serve, Green Mountain-like product.
Starbucks declined comment, but a spokeswoman added that "you'll see an announcement in the near future and more, over time, after that." Green Mountain declined comment.
In a note to his clients today, before the Reuter’s story, Scott Van Winkle of Canaccord Genuity said he believed that a deal between Green Mountain and Starbucks “is inevitable.” He said he believes it could be tied to the new Keurig technology Green Mountain discussed on its most recent earnings call. Existing Keurig K-Cup patents start expiring next year.
By contrast, Howard Penney of Hedgeye told his clients that Starbucks “buying Green Mountain, or aligning themselves to the Keurig brewer, is not going to happen.”
The real story—or what I like to call the story's interesting twist?
In response to my question earlier in the day about who Starbucks would partner with, spokeswoman Lara Wyss said, “I think the question is would we partner with anyone?”
She added that the company is looking at all options, including “our own R&D, a partnership with another company and/or through expansion of our VIA brand to other products and forms.” As I noted in October, Treehouse Foods has rolled out a private-label cartridge that works in the Keurig Brewer. That sparked a patent-infringement lawsuit from Green Mountain.
Will Starbucks do the same?
It's unclear, but here is more from Starbucks on the topic:
- The single-serve coffee category is in a nascent stage of development and by no means mature yet. At this early period, there is no way to determine who the winner is yet related to format or machines.
- An analogy is that Starbucks is to the single-serve coffee category as what Apple spacer is to cell phones.
- The industry should not rush to judgment related to the single serve-coffee category as it is in its earliest development—and there's no clear winner yet.
- Starbucks believes it’s is in a unique position with thousands of retail stores and millions of customers daily. The company added that those numbers put it in the "best position for distribution and sales of machines and/or single serve coffee, no matter what the format." The company noted that the success of its instant coffee VIA points to its influence in the marketplace. VIA has racked up $180 million in total sales to date and has 50,000 points of distribution, including in the US, Canada, England, Ireland, Japan and the Philippines.
- Starbucks has been looking at the single-serve category for some time and has many options including R&D, partnerships with another company, or through our VIA brand. We don’t have any specific announcements at this time, however, but should have information in the near future.
- At this point in time, 80 percent of Starbucks customers do not have a single-serve machine.
Interpret at will!
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