Green Mountain Coffee Roasters Inc GMCR.O struck a deal with Dr Pepper Snapple Group Inc (DPS.N) to offer Snapple iced teas in single-serve packs for its Keurig and Vue brewers, the companies said on Tuesday.
The deal, which complements similar ones with Starbucks (SBUX.O), Dunkin' Brands Group Inc (DNKN.O) and Caribou Coffee Co CBOU.O, comes as Green Mountain is working to fend off competition from lower-cost rivals, including private-label manufacturers.
The addition of Snapple "demonstrates Green Mountain's ability to attract and align itself with the best consumer brands, further bolstering its variety of offerings and relevance to consumers," Lazard Capital analyst Matthew DiFrisco said.
The Snapple K-Cup pack iced teas will be available in the United States and Canada in spring 2013, with Vue packs to follow, the companies said in a joint statement on Tuesday.
Green Mountain's stock has been under pressure as investors have been concerned that recent rebates on coffee brewers would hurt the company's profit margins. But DiFrisco said those concerns appear "overblown," citing conversations with management in which they affirmed that the rebates were planned and factored into the company's previous forecast.
Single-serve coffee pods are expected to reach $959.1 million in retail sales this year - up 32 percent, according to Euromonitor International. That would account for about 10 percent of the overall coffee market, which is expected to grow by only 6 percent this year.
Green Mountain shares rose 24 cents, or 1.1 percent, to $22.77 in midday trade on the New York Stock Exchange. Dr Pepper shares were down 12 cents, or 0.3 percent, to $43.93.
(Reporting By Dhanya Skariachan and Martinne Geller; Editing by Gerald E. McCormick and Jan Paschal)