• by Karlene Lukovitz  @KLmarketdaily, March 10, 2011

So much for the speculation as to whether Starbucks was cooking up its own single-serve brewing machine -- or whether Green Mountain's two-week-old deal with Dunkin' Donuts in the single-serve space would preclude a Green Mountain deal with Starbucks.  

The answer to those questions are clearly resounding "no's," as Starbucks and Green Mountain Coffee Roasters Inc. have now announced a partnership to manufacture, market and distribute Starbucks- and Tazo tea-branded K-Cup portion packs for use in Green Mountain's Keurig Single-Cup brewing system.

Keurig, a Green Mountain subsidiary, is by far the largest player in the single-serve segment, with an estimated 80% of a market that has been variously pegged at ranging anywhere between $2.5 and $4 billion.

The deal will provide a significant platform for Starbucks to make brewable single-serve portion packs available through food, drug, mass, club, specialty and department stores in the U.S. and Canada, starting in fall 2011. "Our research shows that more than 80% of current Starbucks customers in the U.S. do not yet own a single-cup brewer and our relationship will enable Starbucks customers to enjoy perfectly brewed Starbucks coffee at home, one quality cup at a time," summed up Starbucks president/CEO/chairman Howard Schultz.

Starbucks is already in the single-serve game in the instant segment, with its Via brand. The company had been supplying coffee units for the Tassimo single brewer marketed by Kraft, but that relationship ended when Starbucks recently severed its retail distribution and marketing partnership with Kraft.

The companies said that they also plan to expand Starbucks K-Cup packs and Keurig Single-Cup brewing system distribution to Starbucks stores, and to sell the K-Cups through the Green Mountain, Keurig and Starbucks Web sites starting in 2012.

The deal was described as making Starbucks the "exclusive, licensed super-premium coffee brand produced by Green Mountain for the Keurig Single-Cup brewing system" -- the key word perhaps being "super-premium."

The Dunkin' deal has no mass retail chain distribution element, but was described as Dunkin's branded coffee being sold in prepackaged K-Cup portions "exclusively" in Dunkin' restaurants. (That deal also calls for Dunkin' to "occasionally" sell Keurig's single-cup brewing units in some of its restaurant units.)

When the Dunkin' deal was announced in late February, Green Mountain president/CEO Lawrence J. Blanford said the company's strategy is to align with the "strongest coffee brands" to "support a range of consumer choice and taste profiles" for its single-cup brewing system.

Asked specifically about Starbucks during the Dunkin' deal press conference, Blanford reiterated a general statement that Green Mountain would continue to evaluate all brands and opportunities going forward within the context of these strategic goals.

Green Mountain also sells K-Cups under brands including Green Mountain, Caribou, Newman's Own, Donut House, Tully's and others online, and at least some of these brands appear to be sold at retailers including Target, Bed, Bath & Beyond and other chains.