If unaware, Keurig machines are designed to make single serving cups of coffee (now tea and hot chocolate as well) by inserting a K-cup into one of Keurig Green Mountain Inc (NASDAQ:GMCR)’s line of coffee makers. The cups which include a filter with coffee and are sealed at the top with foil are pierced on top by a water nozzle while the bottom is pierced by a spout that relieves the K-Cup’s pressurized brew into a mug.
Modified terms and expansion for Starbucks
In exchange for ending the agreement, Starbucks Corporation (NASDAQ:SBUX) will be allowed to expand its offerings of K-Cups for use in Keurig machines. Last year, the company reached an agreement for a minimum of five years that reinforced Starbucks place as the exclusive seller of super-premium K-cups. However, the amended plan for the two collaborators, according to Keurig executive Mark Wood, “creates more favorable business terms for both companies and allows us to build upon our strong relationship.” In addition, to Starbucks coffee, the agreement extends to its line of tea that is sold under the Tazo brand.
Keurig deals with Peet’s and Coca-Cola
In addition to modify its deal with Starbucks Corporation (NASDAQ:SBUX), Keurig Green Mountain Inc (NASDAQ:GMCR) signed a multi-year deal with Peet’s Coffee & Tea, Inc. (NASDAQ:PEET). Details were not disclosed but the proximity of the announcements suggest that Peet’s, which entered the single-cup arena within the last year. It’s believed that Peet’s will begin delivery of both coffee and tea packets for use in Keurig machines towards the end of the summer.
It’s believed that the deal will allow Starbucks Corporation (NASDAQ:SBUX) to begin offering more variety as well as significantly increasing its volume delivery of K-Cups. Peet’s Coffee & Tea, Inc. (NASDAQ:PEET) was taken private in 2012 through an investment and acquisition by German private equity firm Joh. A. Benckiser for just shy of $1 billion.
In addition to the two announcements on Friday concerning both Starbucks Corporation (NASDAQ:SBUX) and Peet’s, Keurig signed a 10-year deal with Coca-Cola last month to sell its own drinks through a beverage system that Keurig Green Mountain Inc (NASDAQ:GMCR) is in the process of perfecting. The Atlanta-based The Coca-Cola Company (NYSE:KO) also purchased 10% of Keurig for a cash payment of roughly $1.25 billion.