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What: Shares of single-serve coffee-slinger Green Mountain Coffee Roasters (NAS: GMCR) were getting gulped down by investors today, rising as much as 14% in intraday trading after investors achieved a level of comfort with the company's relationship with coffee giant Starbucks (NAS: SBUX) .
So what: Fear the Verismo! Or, at least, that's what many Green Mountain investors seemed to be thinking after Starbucks revealed its single-serve homebrew machine earlier this month. However, as both companies were quick to point out, the Verismo is a high-pressure brewer designed to make specialty coffee drinks like cappuccinos, while Green Mountain's Keurig brewers are focused on low-pressure filter coffee.
Worries were further allayed today as Green Mountain announced that not only will the two companies continue their partnership -- Starbucks sells branded coffee and Tazo tea pods for Keurig brewers -- but even expand it. By fall of 2012, Starbucks will also offer single-serve cups for Green Mountain's new, higher-end Vue brewer.
Now what: It's certainly reasonable for Green Mountain investors to be encouraged by today's announcement. That said, I remain a skeptic that Green Mountain is safe from head-to-head competition from big ole 'Bucks. The latter company is looking for growth in multiple new directions. Verismo is one, but it also previously launched a successful instant coffee and now is attacking the energy-drink market with a new "Refreshers" line. If the Verismo works out for Starbucks, would it really be that surprising to see it go after Green Mountain directly?
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