Starbucks' coffee brewer going on sale

Starbucks's Hannah So demonstrates a Verismo single-serving espresso

Starbucks's Hannah So demonstrates a Verismo single-serving espresso machine at the annual shareholders meeting in March. (March 21, 2012) (Credit: AP)

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Starbucks Corp. is about to turn up the heat on the single-serve coffee market, and someone might get burned.

The Seattle-based company this week has started selling its new single-serve brewer online for $199. The machine will be rolled out in its ubiquitous cafes next month.

The arrival of the Verismo, which was announced earlier this year, comes amid intensifying competition in the piping hot market for single-serve brewers and the coffee pods they use.

The sector is dominated by Green Mountain Coffee Roasters Inc., which pioneered the market after its acquisition of the Keurig brand machine in 2006. But this month the company's patent on its K-cup technology expired, which spawned copycat versions of coffee pods for Keurig machines.

Starbucks' decision to sell its own brewer comes less than a year after it struck a deal with Green Mountain to make coffee pods for Keurig machines. Now Starbucks is looking for a bigger piece of the pie.

Starbucks chief executive Howard Schultz said that the relationship with Green Mountain will continue and that Starbucks will still sell its pods for Keurig machines in cafes. He said that the Keurig machine is "a fantastic choice" for customers who want only brewed coffee.

The Verismo, however, uses a high-pressure system that can make lattes and other espresso-based drinks, as well as brewed coffee. Essentially, Starbucks has said its machine targets a different type of customer.

"They'll coexist and be complementary," Schultz said.

Investors aren't so certain. When Starbucks first announced its plans to roll out the Verismo in March, shares of Green Mountain plunged. Green Mountain's stock has lost 51 percent of its value since then. Starbucks' stock is little changed in the same period.

Schultz said Starbucks identified the single-serve coffee market as a "big opportunity" about two years ago. Since introducing its pods for the Keurig system last year, he said, Starbucks has captured 15 percent of the market.

In addition to the $199 Verismo, Starbucks will sell a $399 model with a larger water tank and LED display that tells consumers when the machine needs to be cleaned. Green Mountain's Keurig brewers cost from $99 to $189.

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