Starbucks Single-Serve Verismo Arrives in Stores

Verismo By CANDICE CHOI, AP Food Industry Writer

NEW YORK (AP) - Starbucks Corp. (SBUX) is about to turn up the heat on the single-serve coffee market, and someone might get burned.

The Seattle-based company says it will start selling its new single-serve brewer online this week for $199. The machine will be rolled out in its ubiquitous cafes next month.

The arrival of the Verismo, which was announced earlier this year, comes amid intensifying competition in the piping hot market for single-serve brewers and the coffee pods they use.

The sector is currently dominated by Green Mountain Coffee Roasters Inc. (GMCR), which pioneered the market after its acquisition of the Keurig brand machine in 2006. But this month, the company's patent on its K-cup technology expired, which spawned copycat versions of coffee pods for Keurig machines.

Starbucks' decision to sell its own brewer comes less than a year after it struck a deal with Green Mountain to make coffee pods for Keurig machines. Now Starbucks is looking for a bigger piece of the pie.

In an interview with The Associated Press, Starbucks' CEO Howard Schultz said that the relationship with Green Mountain will continue and that Starbucks will still sell its pods for Keurig machines in cafes. He said that the Keurig machine is "a fantastic choice" for customers who want only brewed coffee.

The Verismo, however, uses a high-pressure system that can make lattes and other espresso-based drinks, as well as brewed coffee. Essentially, Starbucks has said its machine targets a different type of customer.

"They'll coexist and be complementary," Schulz said.

Investors aren't so certain. When Starbucks first announced its plans to roll out the Verismo in March, shares of Green Mountain plunged. Green Mountain's stock has lost 51 percent of its value since then. Starbucks' stock is little changed in the same period.

Daily Market Minute September 20
Green Mountain, which is based in Waterbury, Vt., has also been targeted by a Securities and Exchange Commission inquiry into its accounting methods. Last month, Green Mountain noted that its growth is slowing but that it still expects sales to increase by 15 to 20 percent next year.

The company noted in a statement that it has built a strong customer base for its Keurig system, which offers of 30 brands and more than 200 coffee, tea and other drinks.

"Since the early days of single-serve coffee, we have successfully competed against well-resourced companies," the statement said.

Schultz said Starbucks identified the single-serve coffee market as a "big opportunity" about two years ago. Since introducing its pods for the Keurig system last year, he said Starbucks has captured 15 percent of the market. And last year, he noted that the market for brewers and pods nearly tripled to $8 billion.

"It's rare that you identify a category as large as this that's growing," Schultz said.

In addition to the $199 Verismo, Starbucks will sell a $399 a model with a larger water tank and LED display that tells consumers when the machine needs to be cleaned. Green Mountain's Keurig brewers cost from $99 to $189.

By next week, the Verismo will be available in specialty stores such as Williams-Sonoma (WSM) and Bed, Bath & Beyond (BBBY). Specialty stores also sell other brewers, including the Tassimo by Kraft Foods Inc., which costs between $100 and $170. Starbucks had previously provided coffee discs for Tassimo, but has since ended that agreement.

Starbucks says it plans to tout its brewer with a multimillion-dollar marketing campaign. Schulz noted that customers will be able to buy both the machines and pods at its cafes.

"We're going to make it very, very easy for our customers," he said.

As for the name, "Verismo" is a word derived from a form of Italian opera. As The Wall Street Journal noted earlier this year, the operas usually end with someone's death.


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8 Comments

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kesthekill

HA, SBUX...what would we do without it?

September 21 2012 at 5:37 PM Report abuse rate up rate down Reply
adawson1971

I love my Keurig, but I don't buy k-cups/pods/etc anymore. Just use a recyclable k-cup (shout out to eko-brew, best one on the market) and my own ground coffee. Much cheaper and eco-friendly. So until and unless a company has a recyclable pod/cup, they will not be an alternative for me.

September 21 2012 at 3:44 AM Report abuse +1 rate up rate down Reply
PBK

I tried the new machine at my local SBUX and was not impressed. Why make it at home for more than the cost in the store. Also the coffee produced by the machine did not taste as good. Seems like another promise without substance. I just received the email about the Gold Card Benefits program where benefits are being taken away like a free tall drink when I buy a bag of coffee and on the house soy/syrups. These are tanamount to raising the price of each cup of coffee for your most loyal customers. Shame on you, not only will I not buy the new coffee maker I may turn in my Gold Card and STOP drinking SBUX all together unless the benefits are reinstated.

September 21 2012 at 1:42 AM Report abuse rate up rate down Reply
PBK

I tried the new machine at my local SBUX and was not impressed. Why make it at home for more than the cost in the store. Also the coffee produced by the machine did not taste as good. Seems like another promise without substance. I just received the email about the Gold Card Benefits program where benefits are being taken away like a free tall drink when I buy a bag of coffee and on the house soy/syrups. These are tanamount to raising the price of each cup of coffee for your most loyal customers. Shame on you, not only will I not buy the new coffee maker I may turn in my Gold Card and STOP drinking SBUX all together unless the benefits are reinstated.

September 21 2012 at 1:40 AM Report abuse rate up rate down Reply
PBK

I tried the new machine at my local SBUX and was not impressed. Why make it at home for more than the cost in the store. Also the coffee produced by the machine did not taste as good. Seems like another promise without substance. I just received the email about the Gold Card Benefits program where benefits are being taken away like a free tall drink when I buy a bag of coffee and on the house soy/syrups. These are tanamount to raising the price of each cup of coffee for your most loyal customers. Shame on you, not only will I not buy the new coffee maker I may turn in my Gold Card and STOP drinking SBUX all together unless the benefits are reinstated.

September 21 2012 at 1:39 AM Report abuse rate up rate down Reply
Mom ColinCaitlyn

I tried the new machine at my local SBUX and was not impressed. Why make it at home for more than the cost in the store. Also the coffee produced by the machine did not taste as good. Seems like another promise without substance. I just received the email about the Gold Card Benefits program where benefits are being taken away like a free tall drink when I buy a bag of coffee and on the house soy/syrups. These are tanamount to raising the price of each cup of coffee for your most loyal customers. Shame on you, not only will I not buy the new coffee maker I may turn in my Gold Card and STOP drinking SBUX all together unless the benefits are reinstated.

September 21 2012 at 1:37 AM Report abuse rate up rate down Reply
Mom ColinCaitlyn

I tried the new machine at my local SBUX and was not impressed. Why make it at home for more than the cost in the store. Also the coffee produced by the machine did not taste as good. Seems like another promise without substance. I just received the email about the Gold Card Benefits program where benefits are being taken away like a free tall drink when I buy a bag of coffee and on the house soy/syrups. These are tanamount to raising the price of each cup of coffee for your most loyal customers. Shame on you, not only will I not buy the new coffee maker I may turn in my Gold Card and STOP drinking SBUX all together unless the benefits are reinstated.

September 21 2012 at 1:37 AM Report abuse rate up rate down Reply
Phil1957

The machine may be great. We will see. Prior machines that Starbucks introduced were disappointing, with high prices and quality that was disappointing. Starbucks has also recently broken a promise to their loyal customers by taking away the free tall drink when you buy a lb. of coffee for their gold card members. They initially offered this to anyone buying a lb of coffee. They ended that but then said those earning gold card status (which means you are spending a lot of money with them) would get a free tall drink. Now all that did spend money like this with them - they are basically reneging on a promise. Its too bad. Companies are judged based on their ethics. And Starbucks - while leading the way in many areas - is flunking this test in the most basic way; honoring their commitment to loyal customers. And during that same period they have raised their coffee beans by 40%. But they can't continue giving you a courtesy drink? It takes a lot for me to get upset, but this did it for me. And their Keurig cups are way overpriced. It costs almost as much per cup as buying a cup in the store. I think Mr. Schultz has forgotten the basic principles his company was founded on.

September 20 2012 at 7:36 PM Report abuse rate up rate down Reply
Elizabeth Warynick

I WILL NEVER BUY STARBUCKS AGAIN!!!!

September 20 2012 at 4:44 PM Report abuse rate up rate down Reply