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Updated Friday, March 9, 2012 at 07:02 AM

At-home brewing partner scorched after Starbucks announcement

By Melissa Allison
Seattle Times business reporter

The stock of Green Mountain Coffee Roasters fell almost 25 percent at one point Thursday after Starbucks said it will sell a different at-home coffee brewing system.

Two years ago, Starbucks ditched its relationship with Kraft, which also markets an at-home brewing machine, and last year partnered with Green Mountain.

Starbucks' new machine, marketed with Germany-based Krueger and available this fall, makes both espresso drinks and brewed coffee.

Green Mountain's Keurig machines focus on brewed coffee, which requires lower pressure, although the Vermont company markets espresso-roasted coffee for the machines.

The cups used in Starbucks' new Verismo machines will not fit in Green Mountain's Keurig machines.

"The relationship with Green Mountain is as solid today as it was when we began," Starbucks CEO Howard Schultz said on a conference call with analysts. "It is in both our interests for Starbucks and Green Mountain to cooperate in such a way that we continue to sell those K-cups in the same spirit we did when we began."

Starbuck's relationship with Green Mountain was shaky from the start.

Last year, Schultz said in a memo to executives that just having a patent did not ensure Green Mountain's continued primacy in the single-serve category.

The memo came amid rumors that Starbucks hoped to buy Green Mountain.

One analyst suggested at the time that Starbucks may have been playing games by releasing the memo.

"We are amused at the public battles Starbucks finds the need to wage when it cannot get its way in private negotiations," wrote Janney Capital Markets analyst Mitchell Pinheiro, who covered Green Mountain but not Starbucks.

Shortly afterward, Starbucks announced the deal to sell coffee and tea in Green Mountain's Keurig machines.

Green Mountain's stock, which fell $1.32 to $62.40 in regular trading Thursday, dropped $15.50 shortly after the news was announced, then rebounded to finish the after-hours trading session down $9.29 to $53.11.

It went as low as $46.90 in the session.

Starbucks shares rose 88 cents in regular trading to $50.37, a new 52-week high, then climbed $1.82 in extended trading to $52.19.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com. On Twitter @AllisonSeattle.


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