The product, Verismo, will be launched by this year's holiday season and will be sold at some Starbucks stores, as well as at specialty retail locations. During a conference call today announcing the launch, Starbucks said it had developed the product with Krueger, a German company, but declined to discuss pricing or offer marketing details.
The news could be a threat to Green Mountain, with which Starbucks has a relationship. In March 2011, the company signed a deal with Green Mountain Coffee Roasters for the sale, manufacture and distribution of Starbucks and Tazo -- its tea brand -- in K-Cups, the dominant format in the single-serve market. Green Mountain has the patent on K-Cups and owns the Keurig machines for which they are used.
Starbucks was previously unable to get into the Keurig market because of its distribution deal with Kraft Foods, which is the exclusive distributor of Tassimo brewers, another single-serve rival. In November 2010, Starbucks moved to dump Kraft as its coffee distributor in grocery stores.
Green Mountain last month unveiled Vue, its premium line of Keurig brewers, to generate revenue after the K-Cup patent expires later this year. Neither K-Cups nor Vue's pods, V-Cups, will be compatible with Verismo. Starbucks CEO Howard Schultz said on the call that the relationship with Green Mountain had not soured. The two "can and will coexist," he added, because Starbucks' new high-pressure machine will offer espresso-based drinks, whereas Green Mountain's does not. Green Mountain's stock tumbled 15% in after-hours trading following the announcement.
Starbucks has been making strides in the single-serve space for nearly three years. The chain got into the single-serve market with Via, its instant coffee, in 2009. The coffee giant last year struck a deal with Courtesy Products to offer Starbucks single-serve coffee in upscale hotel rooms.
Mr. Schultz pointed out that the at-home coffee machine will not cannibalize Starbucks' own retail business. Also, he said, while Starbucks plans to offer only Starbucks-branded coffee for now, "we reserve the right to open the system to others, and we have not made that decision as of today."