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Starbucks hints at new single-serve coffee drink

By Ben Rooney, staff reporter


NEW YORK (CNNMoney) -- Starbucks confirmed Monday that it is planning to expand its presence in the market for premium single-serve coffee drinks, saying an official announcement could come in the near future.

The Seattle-based coffee chain said it is looking into several options, including different types of products and possible partnerships with other companies.

Starbucks launched its Via brand of instant coffee last year, which sells in individual "sticks" for about $1 per cup.

The new product, which will sell for around 50 cents a serving, could build on the Via brand, according to Starbucks spokeswoman Lara Wyss. It could also be the form of a pod or capsule, she added.

"The single serve coffee category is in nascent stage of development and by no means mature yet," she said. "At this early stage, there is no way to determine who the winner is yet related to format or machines."

However, some industry analysts expect Starbucks (SBUX, Fortune 500) will partner with Green Mountain Coffee Roasters, maker of the popular single-serve K-cup drinks and Keurig brewers.

"Our belief has been, and continues to be, that Starbucks coffee will be available for Keurig brewers later this year," Scott Van Winkle, analyst at Canaccord Genuity, wrote in a research report. "A deal is inevitable."

Wyss stressed it's too soon to speculate about the single-serve product or potential partnership. But she noted that the majority of Starbucks customers do not own a single service machine.

Green Mountain, which dominates the market for single-serve coffee drinks and machines, said it has no comment "on speculation around potential partnerships."

"Given that Starbucks has stated that its goal is to make its coffee available in every form the consumer wants and the Keurig installed base is growing at a pace of over 5 million brewers per year, the partnership looks like a natural," said Van Winkle.

However, he added that Keurig's patent portfolio gives it "a significant advantage by limiting competitive risk," and that the company has a brand that "resonates with consumers."

Shares of Green Mountain (GMCR) fell in early trading Monday but surged higher in the late afternoon. The stock finished the day up more than 6.5% on heavy volume.

The disclosure from Starbucks comes ahead of the March 1 termination of a deal Starbucks has with Kraft (KFT, Fortune 500) to distribute its roast and ground coffee in grocery stores.

The agreement does not apply to Starbucks' Via brand. But the termination means Starbucks will no longer sell its branded T-discs used in Kraft's Tassimo brewer.

CNNMoney's Parija Kavilanz contributed to this report.  To top of page

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