Kraft Inks Deal To Put Starbucks Brand In Tassimo Line

In an effort to leverage a coffeehouse aura for its Tassimo cup-at-a-time beverage maker, Kraft will begin serving up Starbucks. The company, which has handled marketing Starbucks in mass market channels in the U.S. and Canada for about a decade, has inked an alliance with the Seattle-based company to put the coffee brand in Tassimo machines in the two markets.

The company says that four kinds of single-cup Starbucks pods, or "T Discs" will go on sale in December. House Blend, Breakfast Blend, Caffè Verona and Africa Kitamu will be available at, and at retail. Starbucks isn't the only non-Kraft brand sold in Tassimo-disc form; the company also has arrangements with Seattle's Best Coffee, Tazo tea and London-based Twinings.

The Tassimo machine, which has a suggested retail price of $169 in the U.S., brews both coffee drinks and beverages like hot chocolate and tea. It was launched in France in 2004, and--per Kraft--has accounted for 2 million unit sales in seven countries.



The company says it will also end its partnership with current Tassimo distributing partner Braun next June, because Kraft's arch competitor, Cincinnati-based Procter & Gamble, now owns Braun.

At the termination next June of that association, inked before P&G acquired Braun, Kraft will turn to Bosch Household Appliances.

Kraft says on-demand coffee is experiencing double-digit growth, and a March report by Port Washington, N.Y.-based NPD Group agrees that the premium end of the market has driven growth in single-serve beverage makers, with sales of low-end brands sinking.

NPD said that sales of machines over $100 have grown 90%, and that most purchases are for gifting. Kraft says Tassimo is on track to become a $200 million brand by year's end.

Chicago-based consultancy Mintel's "Small Kitchen Appliances" study, released in January, notes that the single-serve products reflect both a move up market by consumers and more numerous partnerships between appliance and food manufacturers. The firm also says the growing Hispanic population is fueling a market for single-serve blenders from the likes of Oster, Hamilton Beach and Back-to-Basic.

Mintel also said Tassimo, manufactured by Saeco and distributed and serviced by Braun, "is among the new products that have not met expectations ... Kraft indicated that, although customers are satisfied with the product, the business model needs to be revised to boost sales."

Sales for such machines--including Senseo, Flavia Fusion and Keurig--were slow when they began rolling out three years ago, partly because consumers found machines unreliable and expensive to refill, and because of the limited scope of flavors and coffee brands available in packet, pod or disc form.

A Kraft spokesperson says that the company has not developed new marketing plans for Tassimo. "We are not running TV right now, but around the time we launched Tassimo in the U.S. in 2004, we did TV advertising. Since then, we have been doing mostly print, online and in-store," she says.

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