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Registered: ‎03-11-2010

Starbucks Competitor for Keurig

From an article published today…excerpt follows

Starbucks Corp. is about to turn up the heat on the single-serve coffee market, and someone might get burned.

The Seattle-based company says it will start selling its new single-serve brewer Verisimo online this week for $199.

The Verismo, announced earlier this year, comes amid intensifying competition in the piping hot market for single-serve brewers and the coffee pods they use.

The sector is currently dominated by Green Mountain Coffee Roasters Inc. But this month, the company's patent on its K-cup technology expired, which spawned copycat versions of coffee pods for Keurig machines.

[Have any of you seen copycat versions of K-cups for Keuring machines yet? I haven’t. When we do, I bet the price of K-cups will come down.]

Starbucks' decision to sell its own brewer comes less than a year after it struck a deal with Green Mountain to make coffee pods for Keurig machines. Now Starbucks is looking for a bigger piece of the pie.

Starbucks' CEO Howard Schultz said that the relationship with Green Mountain will continue and that Starbucks will still sell its pods for Keurig machines in cafes. He said that the Keurig machine is "a fantastic choice" for customers who want only brewed coffee.”

The Verismo, however, uses a high-pressure system that can make lattes and other espresso-based drinks, as well as brewed coffee. Essentially, Starbucks has said its machine targets a different type of customer.

"They'll coexist and be complementary," Schulz said.

Investors aren't so certain. When Starbucks first announced its plans to roll out the Verismo in March, shares of Green Mountain plunged. Green Mountain's stock has lost 51 percent of its value since then. Starbucks' stock is little changed in the same period.

[Bet before long we’ll see a similar type of machine from Keurig. I thought the Vue was such but I’m not sure that’s the case.]

Schultz said Starbucks identified the single-serve coffee market as a "big opportunity" about two years ago. Since introducing its pods for the Keurig system last year, he said Starbucks has captured 15 percent of the market.

In addition to the $199 Verismo, Starbucks will sell a $399 a model with a larger water tank and LED display that tells consumers when the machine needs to be cleaned.

By next week, the Verismo will be available in specialty stores such as Williams-Sonoma and Bed, Bath & Beyond.

Starbucks says it plans to tout its brewer with a multimillion-dollar marketing campaign. Schulz noted that customers will be able to buy both the machines and pods at its cafes.

[Wonder if the Verismo will use only a proprietary cup. If so, Starbucks won’t have nearly the variety of coffees that Keurig has, at least not for a long time.] <!--EndFragment-->