Starbucks agreed to give up its role as the exclusive purveyor of “super premium” coffee for the Keurig K-cup brewing system, as Keurig Green Mountain devises new strategies to fend off a recent surge in competitors in the burgeoning market for single-serve coffee pods.
The companies announced Friday that their licensing deal was amended in exchange for “improved business terms” for Starbucks and the opportunity to market a wider variety of pods.
Keurig saw important intellectual-property licenses protecting the K-cup expire in 2012. Since then, rival coffee producers have been manufacturing pods compatible with the best-selling brewing system without paying license fees to Keurig.
Starbucks has been an important partner for Keurig, launching licensed K-cups in late 2011, and last year signed a five-year agreement that allowed Starbucks to add more brands to its K-cup lineup. Through the end of last year, Starbucks had shipped about 2 billion K-cup pods, a key element in the coffee giant’s bid to diversify beyond its coffee shops and into grocery aisles.
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The renegotiated arrangement opens a door for rivals partnering with Keurig to compete for Starbucks’ share of the U.S. market for premium K-cups, which Starbucks executives in a recent earnings call put at 15 percent.
The first of these partnerships was also unveiled Friday — a Keurig deal with Peet’s Coffee & Tea, which last year began producing unlicensed K-cups.
Financial terms were not disclosed. The deal comes in the wake of recent comments by Keurig executives about luring
unlicensed K-cup makers into partnerships in order to regain control of the market.
The executives have also said that they expect the market share of unlicensed K-cups, which stands at 14 percent, to decline in the second half of 2014 as more unlicensed players come into Keurig’s fold.
Part of the lure for unlicensed competitors: Keurig is launching an improved version of its brewing system that, in addition to brewing carafes of coffee, won’t brew unlicensed packs.
Sales of coffee made in single-serve brewing systems were minuscule five years ago, but now account for more than a quarter of every dollar Americans spend on coffee to drink at home.
Ángel González: 206-464-2250 or firstname.lastname@example.org. On Twitter: @gonzalezseattle