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Starbucks, Green Mountain: K-Cup Deal

(Starbucks-Green Mountain partnership report updated with Credit Suisse estimates on the deal's earnings impact).

SEATTLE ( TheStreet) -- Starbucks (SBUX - Get Report) and Green Mountain Coffee Roasters (GMCR) shares pulled back somewhat on Tuesday, in line with a broad market selloff, though the pair remains much higher in the week after they announced a much-anticipated partnership in the single-serve coffee market.

Starbucks and Green Mountain said early Thursday that beginning in the fall of this year Starbucks and Tazo tea branded K-Cup portion packs will be available for Green Mountain's popular Keurig single-cup brewing systems.

Shares of Starbucks and Green Mountain surged on the day of the announcement, closing up 9.9% and 41.4%, respectively. On Tuesday, Starbucks shares were 0.5% lower in morning trading at $35.55 while Green Mountain lost 1.2% to $58.33.

Shares of rival coffee maker Peet's Coffee & Tea (PEET) had plunged 11.4% on Thursday, demonstrating investors' disappointment that the California coffee roaster and retail chain operator was left out of the lucrative new partnership. Peet's shares edged another 1% lower Tuesday morning to trade at $41.62.

Starbucks hinted last month that such a partnership was in the works when it told news outlets in February it had plans to announce a new product for the single-serve coffee market "in the near future." The Seattle coffee shop chain did announce a distribution agreement with Courtesy Products, a privately held provider of in-room coffee service to hotels across the U.S.

Starbucks already sells individual instant coffee packets under its Via brand, but speculation among analysts had been mounting that Starbucks was poised to push more aggressively into the single-cup brewing market now dominated by Green Mountain's Keurig machines and K-Cup portion packs .

Thursday's announcement further confirms Starbucks push to expand its footprint in the single-serve market.

Analysts from Credit Suisse estimate that the deal will add 15 cents per share to Starbucks' earnings in fiscal 2012, and 23 cents per share in fiscal 2013.
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