K-Cup coffee: A threat to Starbucks?

Starbucks (NASDAQ:SBUX) was a revolution or rather an evolution in waiting, whose time had arrived. But the company—the number one coffee retailer in the world with 16,850 coffee shops in about 40 countries—is fast losing its US market share to a simpler concept; yet another revolution.

Behold K-Cup, a simple home-brewing option that can be used to brew your single cup of coffee belonging to the coffee house that you prefer.

With regular to flavoured to travel-mug K-Cups, you can taste 116 varieties of coffee from over 22 brands ranging from Tully’s to Timothy’s (excluding Starbucks) at your home and guess what: cheaply.

K-Cup is a sealed cup of ground coffee that you can fetch from your nearest retailer and insert in a machine—Keurig --that gives you great coffee under the spout in less than a minute. For instance, if you are a Tully’s fan, you can buy one of the K-cups offering Tully-brand coffee and insert into Keurig and savour to salvation. In other words, Keurig provides you choice!

Of the approximate 24,512,4000 adults (including teenagers) in the US in 2009, 54% or 13,236,6960 drink coffee and great number of them drink coffee from Starbcuks and contribute to its chest.

But the recent change in coffee consumption pattern in US has given Starbucks jitters. There, people are moving into home-brewed coffee as a cheaper, greener alternative that also provides freedom of choice.

According to a survey carried out by National Coffee Association of USA and quoted by coffeemarvel.com, 83% of coffee enthusiasts brewed their previous day’s coffee at home.

This figure is equivalent to 10,98,64576 coffee lovers; roughly one third of the American population. And the trend is fast catching up.

(Bloomberg reports that single-cup coffee sales are witnessing growth 28 times as fast as the overall coffee market.)

Enter Keurig Home Brewer, the new dragon from Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). The machine has 71% market share when compared to Kraft Foods Inc.’s (NYSE: KFT) Tassimo machine (2.6%) where Starbucks till November last year, used to put its coffee.

Since then Starbucks has been trying to disengage itself and start off with something new to catch up. It tried to enter the single-cup brew market with Via Ready Brew, that when dissolved in hot or cold water would provide coffee. The venture, according to Starbucks, would assume profitability this year.

Media reports suggest that Starbucks is also contemplating a tie-up with Acosta Inc. the largest sales, marketing and service company is US to promote its coffee.

The moves also mark the end of a decade plus Kraft-Starbucks partnership. Kraft sued Starbucks for its decision to end partnership.

In the high tables of US courts, Starbucks argued that Kraft showed no craft in bagging a chunk of market share while Kraft could not prove that ending the contract would affect Kraft in an irreparable manner that cannot be compensated monetarily.

Court, invariably has given a thumbs-down to Kraft.

Starbucks has also agreed with Courtesy Products to provide Starbucks Premium single-serve coffees in 500,000 luxury & premium hotel rooms across the U.S in a bid to corner the commercial coffee segment.

Courtesy is a leading provider of in-room coffee service to hotels and the move to provide Starbucks ground coffees for use in Courtesy’s patented CV1 in-room and on-demand brewed coffee system would open new vistas to Starbucks; it is expected.

“In a recent study, 95% of Courtesy’s hotel customers surveyed said they prefer and would recommend the CV1 single-cup system over traditional in-room solutions.”, a statement from Starbucks news room blared.

Clearly, the storm is brewing; the K-Cup storm!

As published in: http://www.commodityonline.com/news/K-Cup-coffee-a-threat-to-Starbucks-36830-3-1.html