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NEW YORK, N.Y. - Starbucks has signed a new five-year contract that triples the number of branded single-serve packs it makes for Green Mountain's Keurig brewing machines.
The deal comes after Starbucks last year introduced its own single-serve brewing machine, which was seen by many as posing a threat to Green Mountain's popular machines. Green Mountain, based in Waterbury, Vt., was a pioneer of single-serve coffee in the U.S. with its Keurig machines and coffee pods. But the company has since faced challenges with the patent on the technology for its K-Cups expiring and competitors rolling out their own products.
Citing the rapid growth of the single-serve market, Starbucks last fall began selling its Verismo machines at some cafes and some specialty retailers. The Seattle-based company noted at the time that its machine is aimed at people who want to make espresso drinks such as lattes. Green Mountain's low-pressure machines primarily make brewed coffee.
Under the new deal announced Wednesday, Starbucks Corp. is adding brands such as Seattle's Best coffee and Teavana tea to the packs it will make for Green Mountain Coffee Roasters Inc.'s Keurig and Vue machines. The companies say the deal extends their partnership beyond North America, although they did not specify which international markets they plan to enter.
Financial terms of the deal weren't disclosed.
In an interview on CNBC, Starbucks CEO Howard Schultz said people like single-serve machines because they're convenient and don't waste any coffee. Green Mountain CEO Brian Kelley noted that Keurig is in just 13 per cent of U.S. homes, meaning there's plenty of room for the company to continue growing.
Separately, Green Mountain on Wednesday stronger sales helped lift its profit by 42 per cent in its fiscal second quarter. Shares of Green Mountain Coffee Roasters surged 10 per cent, or $6.22, to $65.70 in after-hours trading. Shares of Starbucks edged down 7 cents to $62.34.