UPDATE 3-Supervalu's private brand coffee pods launch this month

Wed Sep 5, 2012 1:20am IST

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* Supervalu's private brand pods work with Keurig brewers

* Pods to be more lightweight than leading brand

* Shares of Supervalu, Green Mountain both down

By Martinne Geller

Sept 4 (Reuters) - Supervalu Inc plans to launch its own single-serve coffee cups compatible with leading brewing systems, including the Keurig, made by Green Mountain Coffee Roasters Inc, the supermarket operator said on Tuesday.

The product, to be called Java Delight Single Serve UnCup, will go on sale this month in six flavors at the chain's 1,100 retail stores, which include Albertsons, Jewel-Osco and Shop 'N Save.

Analysts and investors have been bracing for an onslaught of competition from lower-cost competitors to Green Mountain, since two of Green Mountain's patents governing pod design are expiring this month.

Supervalu did not say how much its pods would sell for, or who the manufacturer was, but it was clear that they are not being made by Green Mountain, the No. 1 seller of single-serve coffee pods in the United States.

A photo of the UnCup showed that it is made from mesh, whereas Green Mountain's cups are made from plastic. Sam Mayberry, Supervalu's vice president of private brands said the UnCup pod uses 30 percent less material by weight than the leading national brand pod.

A Supervalu spokesman declined to identify the manufacturer saying only that the UnCup will be "competitively priced below the national brands".

Other grocers, including Kroger and Safeway, are selling, or are planning to sell, their own private label coffee pods as well. Reuters first reported news of those retailers' entries in the market in June.

This has hurt Green Mountain's shares, since the competition could pressure prices in the overall category and ultimately hurt Green Mountain's profit margins.

Green Mountain makes most of its money from its so-called K-Cups. It sells the Keurig brewers at cost in order to drive consumer adoption.

Green Mountain spokeswoman Suzanne DuLong said the entry of unlicensed manufacturers has already been factored into Green Mountain's forecasts for 2013 and beyond. She added that the company will continue to defend its intellectual property portfolio.

The company has sued two private label manufacturers for alleged patent infringement.

Supervalu shares were down 13 cents, or 5.4 percent, at $2.25 on the New York Stock Exchange. They were down before the statement. Green Mountain shares were down 34 cents, or 1.4 percent, at $23.96 on the Nasdaq.

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