Coffee Talk: Starbucks Extends Deal With Green Mountain Coffee

Starbucks and Green Mountain Coffee Roasters announced a five-year agreement on Wednesday to to triple the number of Starbucks-branded items made for Keurig single-serve coffee machines, the companies said in a release.

Separately, Green Mountain reported better-than-expected earnings for the fiscal second quarter. Shares shot up 15 percent after-hours.

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Starbucks Green Mountain Coffee
Nelson Ching (L) & Herb Swanson (R) | Bloomberg | Getty

While Starbucks will remain the exclusive licensed super premium coffee brand on the Keurig K-Cup and Vue platforms, under the new agreement, the company will add Seattle's Best Coffee, Torrefazione Italia coffee, Teavana Teas, and Starbucks Cocoa to the brands offered on Keurig.

In a press release, Howard Schultz, Starbucks' chairman and CEO, said sales of Starbucks coffee K-Cup packs rose more than 75 percent in March compared to the prior year.

"The new agreement also affords us the opportunity to expand our successful K-Cup and Vue pack portfolio of products and brands beyond North America and to market them on a truly global scale over time," he said.

"We're going to do everything we can to promote the Keurig system and obviously Starbucks K-Cups and this is going to be a significantly lucrative deal for both companies," Starbucks CEO Howard Schultz told CNBC after the deal was announced.

Brian Kelley, CEO of Green Mountain Coffee, said in the same interview "this partnership with Starbucks is really a terrific thing for our business."

In September, certain patents for the popular K-cups expired, paving the way for others to produce their own machines and pods. Late last year, Starbucks also entered the market for single-serve machines by launching its own, named the Verismo, which analysts viewed at the time as a competitive threat to Green Mountain.

Separately, Green Mountain reported fiscal second-quarter earnings excluding items of 93 cents per share, up from 64 cents per share a year earlier. Revenue increased 14 percent to $1 billion from $885.1 million a year earlier on strong sales of its single serve coffee packs. Analysts were looking for earnings of 74 cents per share on revenue of $1.02 billion, according to estimates from Thomson Reuters.

For the third quarter, Green Mountain expects earnings between 71 cents and 78 cents per share. Analysts currently expect 66 cents a share.