Talk about vertical integration! Starbucks is taking the concept to new heights — er, depths — with its announcement of the imminent introduction of its own machine to make single cups of coffee.
The product, named Verismo, will be launched soon and sold at some Starbucks stores as well as specialty retail locations right away and then more heavily marketed and sold in the fall. The machine was developed with Krueger, a German-based company, and it "combines Starbucks signature Espresso Roast and drink recipes with precise Swiss engineering and a patent-pending high pressure extraction capability," Starbucks said in a press release.
The move is yet another bid by Starbucks to broaden and deepen its franchise over the last couple of years. The company also today, in Amsterdam, was scheduled to open its first "concept shop" laboratory meant to imbue its retail outlets with more "local flavor." Inspired by concept stores in its hometown of Seattle, the new Amsterdam store features in-house-baked cookies, for instance, and will test other ideas. It's housed in an old bank vault in the city's historic Rembrandt square.
In the case of the hot machine single-serve market, Starbucks was restricted because of its distribution deal with Kraft Foods, which is the exclusive distributor of Tassimo brewers. Starbucks moved to dump Kraft as its grocery-store coffee distributor in 2010.
And, of course, there's the matter of Starbucks' partnership with Green Mountain to distribute single pods of Starbucks coffee and its Tazo tea brand in K-Cups under Green Mountain's Keurig brand, still the dominant marque in the single-cup market. Green Mountain unveiled its own Vue single-serve brewer last month.
Starbucks first entered the single-serve market with its Via Ready Brew instant coffee in 2009 and started selling K-cup packs for Green Mountain Coffee’s Keurig single-cup machines in November. But Green Mountain's Keurig K-Cups will not be compatible with Verismo, and Green Mountain investors, among others, certainly understand the implications of that reality: Green Mountain's stock price had slid by about 16 percent today in trading by about 12 noon ET.
Starbucks CEO Howard Schultz told a conference call this week that the two companies "can and will co-exist," while Green Mountain issued a press release stating, "We look forward to continuing to grow the single-serve filtered-coffee opportunity in North America with our Keurig system partners, including Starbucks."
Starbucks wasn't going to let that relationship get in the way of its machine dreams. "We have long believed that the biggest prize within the [premium single-cup segment] is a high-pressure system that would give us the opportunity to deliver Starbucks-quality espresso beverages at home and at work," Schultz said.
As Starbucks means more to coffee drinkers, then, Keurig may mean less.