Starbucks single-cup plan hits Green Mountain shares

BANGALORE Mon Feb 14, 2011 11:00am EST

BANGALORE (Reuters) - Green Mountain Coffee Roasters Inc's (GMCR.O) shares fell as much as 4 percent after Starbucks Corp (SBUX.O) said it plans to announce a new product for the single-cup coffee market, a move that could threaten Green Mountain's dominance in the fast-growing sector.

On Sunday, the world's biggest coffee chain said it wants to keep all its options open, including partnerships with other firms, extensions to its Via instant coffee line or even selling single-cup brewing machines.

Some analysts have said that a partnership between Starbucks and Green Mountain -- where Starbucks might have made coffee refills for Green Mountain's Keurig machines -- would have been mutually attractive.

Canaccord Genuity analyst Scott Van Winkle continues to believe that Starbucks will partner with Green Mountain.

"Keurig is the dominant brand in single-serve coffee with rapidly rising consumer adoption of its brewers seeding a market opportunity that Starbucks can't resist," the analyst said, backing his "buy" rating.

However, Stifel Nicolaus analyst Mark Astrachan, who rates Green Mountain a "sell," said: "While a potential Starbucks single-cup entry does not prevent a GMCR/Starbucks relationship... it makes it less likely."

Starbucks currently has a deal, ending March 1, to sell coffee discs for Kraft Foods Inc's KFT.N Tassimo -- a rival to Green Mountain's Keurig.

Since the Seattle-based coffee chain announced its plan to end the partnership in November, the companies have been battling over various clauses.

Shares of Green Mountain fell 4 percent before recovering to trade at $42.49, down 2 percent, on Monday morning on Nasdaq. Starbucks shares were up slightly at $33.45.

(Additional reporting by Lisa Baertlein in Los Angeles; Editing by Joyjeet Das)

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