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


* 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 Incplans to sell Maxwell House and Gevalia single-serve coffee podscompatible with Keurig brewing systems, in another blow toKeurig parent Green Mountain Coffee Roasters Inc .

The pods are not licensed by Keurig or affiliated in anyway, Kraft spokesman Basil Maglaris told Reuters. That meansthat Green Mountain will not receive any royalties from theirsale.

The move by Kraft, which also owns the rival Tassimosingle-serve brewer, represents the first time a big-name coffeebrand has skirted Green Mountain in making cups for itsmarket-leading system. Certain Green Mountain patents related tothe design of its K-Cups expired in September, paving the wayfor a wave of competitors.

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

"We believe Green Mountain and the Keurig brand are verywell-positioned to continue our industry leadership byrevolutionizing the way consumers prepare and enjoy qualityspecialty coffee and other beverages," said Suzanne DuLong ofGreen Mountain.

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

For a graphic showing companies' market shares: .

The news was not unexpected, and Green Mountain sharesrecovered after initially falling. They finished regular tradingon Thursday up 0.9 percent at $22.27.

Kraft's action - along with similar launches of privatelabel brands including Kroger Co , Safeway Inc andSupervalu Inc - adds more weight to questions raisedlast year by Greenlight Capital's David Einhorn about thesustainability of Green Mountain's dominance in the single-servemarket. Einhorn publicly disclosed a short position in thecompany a year ago.

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

Starbucks and Dunkin Brands Group Inc's DunkinDonuts 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 coffeesystem. Maglaris could not say whether the Keurig cups wouldcannibalize sales of single-serve discs used in Tassimomachines.

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

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

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