Photo: Daniel Goodman / Business Insider
Starbucks recently announced that it’s launching Verismo — a single-cup coffee and espresso machine — in the fall of this year, reports Lisa Baertlein at Reuters.That’s not good for Green Mountain, a Starbucks partner and seller of the popular Keurig brewers. It has been dominant in the U.S. market for years, but with its most important patents expiring in the fall, competitors were bound to enter.
At first glance, it would seem that the entrance of a coffee monolith like Starbucks could spell disaster for Green Mountain, but that might not be the case.
Green Mountain has a plan to keep its Keurig brand going:
The Keurig brewer isn’t necessarily a direct competitor to the Verismo
The Keurig is a low pressure machine for brewing non-espresso coffee and tea, while the Verismo makes espresso-based drinks and brewed coffee using high pressure.
This means that they each have a different value proposition for consumers, so they shouldn’t end up competing directly against each other. Green Mountain may be able to position its Keurig in a different, lower-end segment if its marketed correctly.
But Green Mountain has to make sure that consumers know about this. It’s not enough to simply differentiate a similar product — people need to know exactly why the product fits their needs better than the competition. If they don’t, then that differentiation factor doesn’t matter.
The two companies plan to keep working together, for their mutual benefit
Starbucks seems on board with this. CEO Howard Schultz said on Thursday, “it’s in both our interests for Starbucks and Green Mountain to cooperate in a way where we continue to sell those K-cups in the same spirit as when we began,” according to Dow Jones.
That’s good for Green Mountain — as long as Starbucks keeps making money in that market off of its branded K-cups (which Green Mountain manufactures).
After all, it needs Starbucks to keep selling its brands on the Keurig platform more than Starbucks needs that business. But if (or when) the day comes when it’s no longer beneficial for Starbucks to stay on the Keurig, you can bet it will pull out.
And if Starbucks ever starts manufacturing its own K-cups, Green Mountain’s going to be in big trouble.
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