June 14, 2012 / 8:46 PM / 5 years ago

Rogers behind Safeway's one-cup coffee pod

NEW YORK (Reuters) - Rogers Family Co, a privately held company based in California, is the manufacturer for Safeway Inc’s SWY.N private label coffee cups compatible with Keurig brewers, the coffee roaster’s president told Reuters on Thursday.

Rogers’ cup is compatible with the Keurig brewers, but is not made through a licensing agreement with Keurig’s owner, Green Mountain Coffee Roasters Inc GMCR.O.

That means Green Mountain does not make money from sales of Safeway Select single-serve coffees, which are priced lower than Green Mountain’s brands and therefore could take some of its market share.

Analysts and investors are watching closely the moves by private label brands into the single-serve coffee space, expecting that the availability of cheaper products will pressure prices commanded by Green Mountain.

Green Mountain sells the Keurig machines, but gets the bulk of its profits from the K-Cups. Its margins are expected to contract as more competitors enter the fray.

Earlier this week, a California Safeway store was selling Safeway Select 12-packs for $6.99 or 58 cents apiece, whereas Green Mountain brands were selling for $8.99 or 75 cents apiece.

Rogers already sells Keurig-compatible OneCups under its San Francisco Bay brand, and as such is facing a patent infringement lawsuit from Green Mountain. The Vermont-based coffee company has dozens of patents governing the design of its K-Cups, its machines and the interface between the cup and machine.

But where K-Cups are made of hard plastic, Rogers’ cups are made of mesh, a difference that Rogers believes will help it prevail in court.

“From a legal point of view, it is our opinion that it is apples and oranges,” Jon Rogers, the company’s president, said in an interview. “I was certainly aware of the fact that there are patents and I certainly wouldn’t have done it if I thought I’d lose a patent suit.”

The San Francisco Bay OneCups have sold at Costco Wholesale Club (COST.O) for 32.5 cents apiece.

Safeway is Rogers’ first private label customer, but the family-run company has been approached by others, Rogers said.

Reporting By Martinne Geller in New York; Editing by David Gregorio and Leslie Gevirtz

Our Standards:The Thomson Reuters Trust Principles.
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