Starbucks, Keurig rewrite terms of coffee-pod deal
Starbucks will give up its exclusive role as purveyor of “super premium” coffee to Keurig Green Mountain as the maker of the Keurig K-cup brewing system looks to fend off unlicensed competitors.
Seattle Times business reporter
Starbucks agreed to give up its role as the exclusive purveyor of “super premium” coffee for the Keurig K-cup brewing system, as Keurig Green Mountain devises new strategies to fend off a recent surge in competitors in the burgeoning market for single-serve coffee pods.
The companies announced Friday that their licensing deal was amended in exchange for “improved business terms” for Starbucks and the opportunity to market a wider variety of pods.
Keurig saw important intellectual-property licenses protecting the K-cup expire in 2012. Since then, rival coffee producers have been manufacturing pods compatible with the best-selling brewing system without paying license fees to Keurig.
Starbucks has been an important partner for Keurig, launching licensed K-cups in late 2011, and last year signed a five-year agreement that allowed Starbucks to add more brands to its K-cup lineup. Through the end of last year, Starbucks had shipped about 2 billion K-cup pods, a key element in the coffee giant’s bid to diversify beyond its coffee shops and into grocery aisles.
The renegotiated arrangement opens a door for rivals partnering with Keurig to compete for Starbucks’ share of the U.S. market for premium K-cups, which Starbucks executives in a recent earnings call put at 15 percent.
The first of these partnerships was also unveiled Friday — a Keurig deal with Peet’s Coffee & Tea, which last year began producing unlicensed K-cups.
Financial terms were not disclosed. The deal comes in the wake of recent comments by Keurig executives about luring unlicensed K-cup makers into partnerships in order to regain control of the market.
The executives have also said that they expect the market share of unlicensed K-cups, which stands at 14 percent, to decline in the second half of 2014 as more unlicensed players come into Keurig’s fold.
Part of the lure for unlicensed competitors: Keurig is launching an improved version of its brewing system that, in addition to brewing carafes of coffee, won’t brew unlicensed packs.
Sales of coffee made in single-serve brewing systems were minuscule five years ago, but now account for more than a quarter of every dollar Americans spend on coffee to drink at home.
Ángel González: 206-464-2250 or firstname.lastname@example.org. On Twitter: @gonzalezseattle