Starbucks, Green Mountain Brew Up Amended Agreement

Source: Thinkstock

Source: Thinkstock

Starbucks (NASDAQ:SBUX) and Keurig Green Mountain (NASDAQ:GMCR) revisited their partnership this week and announced Friday that the two parties amended the terms to their existing five-year agreement. Green Mountain said in a press release that the companies have updated their agreement, eliminating the super-premium coffee exclusivity terms that previously existed and adding business terms that will expand Starbucks’s range of K-Cup pack offerings and give consumers a wider range of coffee choices.

Both Starbucks and Green Mountain appeared pleased with their amended agreement Friday, and the two parties’ executives recognized the growing power they have harnessed in the expanding premium single cup coffee industry. According to Green Mountain’s press release, Starbucks Coffee Company group president, China and Asia Pacific, Channel Development and Emerging Brands, John Culver explained at the end of the week, “This amendment advances Starbucks commitment to strengthening its global leadership position in the nearly $8 billion premium single cup coffee category. With nearly 2 billion Starbucks K-Cup packs shipped from the inception of our relationship through the end of 2013, this contractual update underscores the appeal of Starbucks to the millions of Keurig brewer owners and the continued innovation and collaboration our relationship reflects.”

And Starbucks certainly isn’t the only party to benefit from its improved business terms — Green Mountain scores big, too, even though it’s not as evident to outside observers. Last week, we learned in greater detail how the Waterbury, Vermont-based company now continues to reap the benefits from the growing single cup coffee industry, and its latest announcement further evidences its ability to enjoys the benefits of other company’s gains. Because Green Mountain owns or sells a number of the most popular K-Cup brands — from Donut House to Revv — it enjoys a trust over many K-Cup sales. Therefore even those partner brands that Green Mountain doesn’t own, such as Newman’s Own, help boost the company’s business because Green Mountain pays royalties to a brand to produce and sell pods with a different label. In the case of Starbucks, Green Mountain supplies K-Cups to the coffee chain, and Starbucks handles the retailing, which is why Green Mountain would like Starbucks’s business to continue thriving, even though many view the two companies as competitors.

Mark Wood, Senior Vice President, Global Hot Systems for Keurig, explained Friday via Green Mountain’s press release, “This amended agreement creates more favorable business terms for both companies and allows us to build upon our strong relationship.”

So whether you’re filling your cup via a Green Mountain pod or a Starbucks one, the former company always benefits. That’s why it wants to make sure its consumers are content and are loyal to the Starbucks or Green Mountain brand, now more than ever, and customers will see that desire reflected in the increase range of coffee choices offered to them.

More From Wall St. Cheat Sheet: