Bloomberg News

Green Mountain Introduces Nestle-Rival Keurig Latte Brewer

February 15, 2012

(Updates share price in last paragraph.)

Feb. 15 (Bloomberg) -- Green Mountain Coffee Roasters Inc., the maker of Keurig single-serve brewers and capsules, will begin selling a higher-priced coffee machine in a bid to compete with Nestle SA’s latte and cappuccino makers.

The new brewer can make cafe beverages with separate dairy frother capsules, the Waterbury, Vermont-based company said in a statement today. Green Mountain will sell so-called Vue packs to use with the brewer in brands including Folgers Gourmet Selections and Millstone and will have 50 varieties by the end of June.

The new machine may help Keurig stay competitive after its main patents on K-Cups, the coffee pods that helped make it the biggest company in the U.S. single-serve coffee market, expire in September. The Vue also lets users choose different strengths of coffee to brew and make larger, up to 18 ounces (532 milliliters), amounts at one time.

“The challenge will be execution in terms of customer friendliness and minimizing consumer confusion” with the Vue brewer, Nick Lazaris, former president of Keurig, said during a a telephone interview yesterday. “Those are the things that the management team has presumably thought through.”

The idea for the Vue dates back to 2006 when Green Mountain bought Keurig and answered questions about “what happens when the patents run out,” Lazaris said.

The Vue machine will be sold at Bed Bath & Beyond Inc. and on the Green Mountain and Keurig websites “in the coming weeks,” the company said. The machine costs $250 and a 16-pack of Green Mountain breakfast blend coffee Vue capsules costs $12 on the Keurig website.

Nestle’s CitiZ

Nestle’s CitiZ machine, which makes milk-based coffee drinks, costs $349, while its Lattissima is $399, according to the Nespresso website. Tassimo, owned by Kraft Foods Inc., also makes lattes and cappuccinos with single-serve Gevalia and Maxwell House brand capsules. The machines are priced between $100 and $170 on the Tassimo website.

Green Mountain has sought to boost single-serve sales by partnering with brands such as Starbucks Corp. and Dunkin’ Brands Group Inc.’s Dunkin’ Donuts -- these two brands aren’t available in Vue packs. The company earlier this month reported that K-Cup sales more than doubled while brewer sales in the three months ended Dec. 24 rose 76 percent from a year earlier.

Green Mountain also is working with Luigi Lavazza SpA to develop an espresso machine. Lavazza, based in Italy, owned 5.5 percent of Green Mountain as of May 6, according to data compiled by Bloomberg.

Green Mountain fell 2.3 percent to $65.75 at the close in New York. The shares gained 36 percent last year.

--With assistance from Cotten Timberlake in Washington. Editors: Robin Ajello, James Callan

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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