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Is a Starbucks-Green Mountain Partnership in the Works?

Starbucks will begin offering its coffee for the CV1 this fall, but indicated it continues to look for other ways to further push its popular coffee into the single-serve market.

"The single-serve coffee category in the U.S., and much of the world for that matter, is in its beginning stages of development," said Starbucks consumer products group president Jeff Hansberry. "At this very early stage, there are numerous contenders and no demonstrated, long-term winners related to either format or machines. Following our very successful introduction of Starbucks VIA Ready Brew in the U.S. and into a growing number of international markets, Starbucks will continue to explore the many single-serve and on-the-go solutions and options available to us, and to participate in those where we can better and more conveniently serve our customers wherever they may be."


"Look for further announcements from Starbucks as we continue to expand our presence in the premium single-serve category," Hansberry added.

Reports in the Chicago Tribune and Reuters over the weekend "indicate Starbucks will sell brewers in its stores," noted Canaccord Genuity consumer analyst Scott Van Winkle.

"Our belief has been, and continues to be, that Starbucks coffee will be available for Keurig brewers later this year. A deal is inevitable, in our opinion, and the timing may be soon, given these articles."

Van Winkle said the reports fueled further speculation about Starbucks' plans after its agreement with Kraft -- a partnership where Kraft dispenses Starbucks' products to grocery stores and other retail outlets in the United States, Canada, Britain and other countries -- ends on March 1.

Part of the Starbucks-Kraft agreement involved Starbucks providing coffee discs for Kraft's Tassimo single-cup home brewers. Despite Tassimo's success with some consumers, Green Mountain's Keurig brewing system enjoys market share of around 80%, according to Reuters, dominating other competitors as well, including Sara Lee's (SLE) Senseo brewer and Nestle SA's (NSRGY) Nespresso system.

The Keurig-installed base grows at over 5 million brewers annually, Van Winkle said -- an attractive growth prospect for Starbucks, which has said it intends to make its coffee available in every form consumers want.
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