Starbucks Corp. has introduced its new single-serve brewer Verismo, which will be sold online this weekend for $199. The Starbucks Corp. Verismo machine is planned to be sold in the company’s cafés next month. The competitive prices of the Starbucks new coffee machine could be a threat to brewers from Green Mountain Coffee Roaster Inc. and Nestle SA, the dominant players in the single-serve coffee market valued at $8 billion.
The single-serve coffee market affected by Starbucks Verismo
The competition in the growing single-serve coffee market is intensifying, though Starbucks Corp. decided to introduced its new Verismo machine to the market.
The single-serve coffee market, which was pioneered by Green Mountain Coffee Rosters Inc., sees the growing competition among companies as Green Mountain Coffee Roasters Inc.’s patent on its K-cup technology expired. Supermarkets and other companies were encouraged by the expiration of the patent so they introduced their versions of coffee pods that could be used in Keurig machines, which had been acquired by Green Mountain Coffee Roasters Inc. in 2006.
The most important players in the single-serve coffee market are Green Mountain Coffee Rosters Inc. and Nestle SA. According to compiled data, Green Mountain's Keurig one-cup coffee brewers control more than three-quarters of the U.S. market. In addition, Nestle SA Nespresso espresso maker holds a roughly 35 percent share globally, but mainly its share is concentrated in Europe. Nespresso costs from $130 to $700, while Green Mountain's new Keurig Vue coffee machine is sold for approximately $250.
Green Mountain Coffee Rosters Inc. is a Starbucks Corp.'s partner and it had been affected by the first announcement of Starbucks Corp.'s plans for introducing Verismo machine in March. Green Mountain’s shares dropped. However the recent move of introducing Starbucks Corp. Verismo machine to the market may stop Nestle SA from expanding into the U.S. single-serve coffee market. Howard Schultz, chief executive officer at Starbucks Corp., has emphasized that the company remains committed to its partnership with Green Mountain Coffee Rosters Inc. As it has been stated by him, the Starbucks Corp. Verismo machine will coexist with the existing partnership.
Starbucks Verismo introduced
Starbucks Corp.’s decision to introduce its single-cup coffee maker, that will enable its consumers to make their own lattes with real milk, is another step of launching new lines of business. Yet the decision comes a year after Starbucks Corp. signed a deal with Green Mountain Coffee Rosters Inc. to produce coffee pods for Keurig machines.
The Starbucks Corp. Verismo machine is priced at $199 while the larger version of it, with more advanced technology including temperature controls and self-cleaning, will cost $399. The sale of the Starbucks Corp. Verismo machine will begin in October.
As it was stated by the company, the Starbucks Corp. Verismo machine brews coffee and make espresso, while the Keurig and Nespresso are only able to make one type of coffee. Therefore, Starbucks Corp. has informed that its new coffee machine targets different customers. In addition, as it was stated by Howard Schultz, "Seventy-five percent of existing Starbucks customers do not yet own a single-cup machine, primarily because the two machines (from Nestle and Green Mountain) don't deliver on the expectations that our customers want."