Starbucks (SBUX) Introduces a Green Mountain (GMCR) Killer

March 8, 2012 4:27 PM EST
(Updated - March 8, 2012 5:22 PM EST)

Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR) are getting slaughtered after-hours Thursday after partner Starbucks (Nasdaq: SBUX) appears to want in on the red hot single-serve coffee market in a bigger way, and is going right for Green Mountain's jugular.

After earlier speculation, which was pooh-poohed by some analysts, Starbucks announced after the close Thursday the introduction of the Verismo system, which it says is "the first at-home premium single cup machine that meets its commitment to taste and quality." The system can brew espresso beverages, from lattes to americanos, and coffee consistently and conveniently one cup at a time.

Through a strategic relationship with privately-held, Germany-based Krueger GmbH & Co. KG, Starbucks will market and sell the premium Verismo system by Starbucks and Starbucks-sourced 100 percent arabica coffee and milk pods starting this fall.

"The premium single-cup segment is the fastest-growing business within the global coffee industry," said Howard Schultz, Starbucks chairman, president and ceo. "We have long believed that the biggest prize within the segment is a high-pressure system that would give us the opportunity to deliver Starbucks-quality espresso beverages at home and at work for customers who desire the StarbucksĀ® espresso experience outside of our stores."

On its conference call, Starbucks downplayed the notion that its new machine would be a Green Mountain 'killer', instead focusing on the high-pressure espresso capability of the Verismo. They said the positive relationship with Green Mountain will continue and that Verismo will be "adjacent" to Green Mountain.

Shares of Green Mountain bounced off the lows following the conference call comments but are still down 12 percent.

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