(Starbucks-Green Mountain partnership report updated with news of Starbucks agreement with Courtesy Products.)
SEATTLE ( TheStreet) -- Starbucks ( SBUX) may soon be partnering with Green Mountain Coffee Roasters ( GMCR) as it looks to enter the single-cup coffee market now that its 12-year arrangement with Kraft Foods ( KFT) is coming to an end.
Amid all the speculation, Green Mountain shares surged 6.6% on Monday, but were 4% lower in at midday Tuesday, trading around $44.51. Starbucks shares, meanwhile, closed higher by 0.7% on Monday and were half a point lower on Tuesday at $33.39. Starbucks on Tuesday announced it reached a distribution agreement with Courtesy Products, a privately held provider of in-room coffee service to hotels across the U.S. The Seattle-based coffee shop behemoth already sells individual instant coffee packets under its Via brand, but speculation among analysts has mounted that Starbucks is poised to push more aggressively into the single-cup brewing market now dominated by
"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
Van Winkle added that, "What is new to our conclusions, based on these most recent articles, is that we suspect a Starbucks-Green Mountain partnership might revolve around the launch of a new Keurig brewer technology that is about to be tested. Both articles indicate that a partner has yet to be announced. However, we know that Keurig's patent portfolio around single-serve gives it a significant advantage by limiting competitive risk, and that the company has a brand that resonates with consumers." Commenting on the "more than coincidental" timing of a new Keurig brewer launch from Green Mountain, Van Winkle went on to say that "attaching to the new Keurig technology could put Starbucks in a position to expand the range of beverages available, to lead a better solution than is in the market today, and to be the driver of adoption utilizing its stores for distribution." "Keurig is the dominant brand in single-serve coffee with rapidly rising consumer adoption of its brewers seeding a market opportunity that Starbucks can't resist," Van Winkle said. Despite widespread speculation about a Starbucks-Green Mountain partnership, Starbucks spokeswoman Lara Wyss would not confirm any such agreement. "Starbucks is currently exploring all options to expand its presence in the premium single-cup coffee category, beyond our initial entry with Starbucks Via Ready Brew," she told Reuters. "Single-serve is still in the earliest stages and no clear delivery system has been established as the gold standard so it is important for us to look at all options," Wyss said.
>>See our new stock quote page. Get more stock ideas and investing advice on our sister site, Stockpickr.com.