Green Mountain Coffee Roasters Inc. surged as much as 32 percent in Nasdaq trading after agreeing to distribute Starbucks Corp.’s coffee and teas for its single-serve Keurig brewing systems.
Starbucks, the world’s biggest coffee chain, jumped as much as 8.7 percent. The companies will sell Starbucks and Tazo tea K-Cup portion packs at retailers in the U.S. and Canada this year, according to a statement today. Starbucks K-Cup packs and the Keurig system will be available at Starbucks outlets and through the companies’ websites by 2012, they said.
The deal gives Waterbury, Vermont-based Green Mountain the chance to recruit new users with a premium coffee and access through Starbucks’ more than 11,000 outlets. The company, led by Larry Blanford, is the largest player in the U.S. single-serve coffee market, which generated almost $2 billion in sales last year.
“For Starbucks, it provides needed distribution within a growth market, which should help it build upon its consumer products business,” said Joel Levington, managing director of Brookfield Investment Management Inc. in New York. “For Green Mountain, it reduces the risk that Starbucks pushes its own hardware, and it adds a high-end product for its leading machinery.”
Green Mountain advanced $13.80 to $57.44 at 9:51 a.m. New York time on the Nasdaq Stock Market. Starbucks, based in Seattle, rose $2.94 to $37.48. The gains were the largest since 2009.
Starbucks won an appeals court ruling last month that upholds a decision allowing it to end a deal under which Kraft Foods Inc. distributed Starbucks coffee to grocery stores. Kraft sued in December to prevent Starbucks from ending the arrangement prior to arbitration. In January, U.S. District Judge Cathy Seibel rejected Kraft’s contention that it would be irreparably harmed if Starbucks were to end the agreement.
More than 80 percent of Starbucks customers don’t own a single-cup brewing system, Starbucks Chief Executive Officer Howard Schultz said in today’s statement. Green Mountain has about 80 percent of the U.S. single-cup coffee market. Schultz said in a memo last month that there were “no demonstrated, long-term winners” yet in the single-cup industry, comments that sent Green Mountain shares tumbling.
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