Starbucks, Green Mountain Expand Single-Cup Alliance

Investor's Business Daily

Shares of Green Mountain Coffee Roasters (NASDAQ:GMCR - News) perked up Wednesday on an expanded relationship with Starbucks (NASDAQ:SBUX - News), which is still pushing ahead with its own single-cup brewing machine.

Starbucks will make and sell coffee packets for Green Mountain's new Keurig Vue single-cup brewing machines, designed to brew stronger, larger and hotter cups of coffee. It has sold single-cup coffee pods for existing Keurig machines as the exclusive licensed brand since March 2011.

"Premium single cup is the fastest-growing segment of global coffee," said Jeff Hansberry, Starbucks' president of channel development, in a written statement. "And the expansion of our relationship with GMCR allows us to grow further, faster.

But the coffee shop giant has even bigger expansion plans. On March 9, it said it would introduce the Verismo single-cup brewer, set to go on sale in late 2012. Green Mountain shares dived nearly 16% that day.

They rebounded almost 11% to 56.20 in mid-afternoon trading on Wednesday.

Green Mountain controls more than three-fourths of U.S. single-cup brewing sales, the fastest-growing coffee segment. But Starbucks may be able to overwhelm its smaller rival, analysts say. Also, Green Mountain's Keurig patents are expiring this year.

Starbucks, which held its annual shareholders meeting Wednesday, rose 6 cents to 53.79.

Peet's Coffee & Tea (NASDAQ:PEET - News), which some watchers said could benefit if the spat continued, and has been rumored as a Starbucks takeover target, rose 2.2% to 70.71.

Meanwhile, McDonald's (NYSE:MCD - News), which in recent years launched its McCafe of in-store gourmet coffees, slid 0.5% to 97.14.

Dunkin' Brands (NASDAQ:DNKN - News), which runs the Dunkin' Donuts coffee and doughnuts chain, fell 9 cents to 31.08.

Starbucks' stock has risen sharply as it continues its global expansion. Shares have climbed 53% since their early October low and shot up 662% from a recession low of 7.06 in November 2008.

Green Mountain's shares crashed 71% from a Sept. 23 peak of 115.98 to a low of 34.06 on Nov. 11 on uncertainty about its relationship with Starbucks.

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