Keurig Green Mountain Up on Amended Starbucks Pact - Analyst Blog

Shares ofspecialty coffee maker, Keurig Green Mountain, Inc. GMCR rose 2% after it announced an amendment to its five-year agreement with coffee giant, Starbucks Corporation SBUX which will provide it with better business terms. In exchange, Starbucks will be giving upexclusivity license for the high-end K-Cup pods that it distributes for Keurig Green Mountain.

Under the exclusive deal, Starbucks sells its coffee in single-serve pods —Vue and K-Cup portion packs — that can be brewed on Keurig Green Mountain's Keurig brewers. However, the terms have now been amended to rule out the exclusivity terms in exchange for improved business terms and access to wider variety of K-Cup packs for Keurig Green Mountain.

KeurigGreen Mountain has similar several strategic agreements with other coffee and beverage companies like Unilever plc UL and Dunkin Brands Group Inc. DNKN to offer the signature drinks of these companies in Keurig Green Mountain's K-cups and Vue packs.

In fact, on Mar 14, Keurig Green Mountain signed a similar partnership deal with Peet's Coffee & Tea, a specialty coffee and tea company. Under the deal, Peet's will manufacture and distribute a line of its coffee and tea products in K-Cup packs that can be used on Keurig brewers.

After the expiry of the K-cup patents in Sep 2012, competition intensified for Keurig Green Mountain after several unlicensed versions of the portion packs became available, which were competitively priced. As a result, the company lost a significant share in the past few quarters. In order to protect its market share, Keurig Green Mountain is now approaching all major retailers so that they use Keurig Green Mountain's portion packs instead of their own unlicensed versions.

Currently, Keurig Green Mountain has a Zacks Rank #4 (Sell).