Green Mtn. shares slump on Verismo worries

[March 10, 2012]  NEW YORK (AP) -- Shares of Green Mountain Coffee Roasters Inc. plunged in premarket trading Friday because of worries about the competitive threat Starbucks' new single-cup coffee machine poses to Green Mountain's Keurig machines.

On Thursday Starbucks Corp. announced that it will sell a single-cup coffee machine, the Verismo, in the fall. Users can brew lattes and other coffee drinks at home.

It's the latest step into the growing single-serve market for Seattle-based coffee giant Starbucks, which began selling K-cup packs for Green Mountain's Keurig single-cup machines in November.

Green Mountain shares slid $8.90, or 14.4 percent, to $53.44 in premarket trading, while shares of Starbucks added $1.49, or 3 percent, to $51.86.

Company executives tried to play down the competitive threat of the new machine. Starbucks CEO Howard Schultz said Thursday the two companies could "co-exist." Schultz added that Verismo and Keurig are intended to meet different needs, with the Verismo for customers that want espresso and the Keurig for brewed coffees.

Green Mountain echoed Schultz's sentiments on Friday, saying that the machines make different kinds of coffee, and that the two companies' relationship will continue.

"We believe Starbucks to be a very satisfied participant in the Keurig K-Cup system, having frequently communicated its ongoing support of the Keurig K-Cup platform," Green Mountain CEO Lawrence Blanford said in a statement.

William Blair's Jon Andersen kept his rating on Green Mountain at "Outperform," but said that the Verismo could be a concern because "most consumers will elect to place just one such machine on the kitchen countertop, and those with a strong preference for espresso-based beverages will have a new option to consider."

But Mitchell Pinheiro of Janney Capital Markets was not as worried, saying that the Verismo was a complementary product and should not hurt Keurig's potential customer base. He maintained Green Mountain's "Buy" rating and $125 price target.

A representative for Green Mountain, which is based in Waterbury, Vt., could not be immediately reached for comment.

[Associated Press]

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