Nespresso takes aim at Green Mountain's Keurig with big-cup brewer

BOCA RATON, Florida Thu Feb 20, 2014 5:04am IST

The Nestle logo is pictured on a truck outside the company's headquarters before the nine-month sale figures news conference in Vevey October 17, 2013. REUTERS/Denis Balibouse/Files

The Nestle logo is pictured on a truck outside the company's headquarters before the nine-month sale figures news conference in Vevey October 17, 2013.

Credit: Reuters/Denis Balibouse/Files

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BOCA RATON, Florida (Reuters) - Nespresso is launching a new single-serve coffee brewer that makes larger American-sized portions, putting its Swiss parent Nestle (NESN.VX) in direct competition with U.S. market leader Green Mountain Coffee Roasters (GMCR.O).

Nestle, the world's largest food company, said on Wednesday its new VertuoLine system will go on sale in the United States and Canada this week. It will make larger cups of coffee as well as the smaller espressos, popular in Europe, for which the brand is already known.

The $8 billion global single-serve coffee market is one of the fastest-growing areas of an otherwise tepid packaged-food industry. Nestle has about 35 percent of the market globally, but its presence in the United States is dwarfed by Green Mountain's Keurig system, which controls more than three quarters of the market.

"We'll watch it like we watch all of them," Green Mountain Chief Executive Brian Kelley told Reuters at the Consumer Analyst Group of New York conference in Boca Raton, Florida.

Other rival brewers include the MyCafe from Bunn, the Tassimo from Kraft Foods Group (KRFT.O) and Starbucks Corp's (SBUX.O) Verismo.

Green Mountain is planning new machines as well. This fall, it will launch Keurig 2.0, which uses both single-serve "K-Cups" and larger-sized "K-Carafe" packs that brew 28 ounces of coffee.

"We want a brewer on every counter and we want a beverage for every occasion of the day," said Kelley, who added that only 20 percent of people in the United States have a single-cup coffee maker.

Keurig personal brewers range in price from about $100 to $180. The list price for Nespresso's basic VertuoLine will be $299 and a version with a milk frother will cost $349.

"Nestle has a great brand, and its core consumers will likely welcome the innovation (of new VertuoLine), but I would expect it to do very little to slow what still today are accelerating adoption trends for the Keurig platform," said Consumer Edge Research analyst Brian Holland.

The price of the VertuoLine, coupled with Nespresso's limited distribution and lack of coffee brand choice likely would keep the threat to Keurig in check, Holland said.

TreeHouse Foods Inc (THS.N) earlier this month sued Green Mountain, alleging it attempted to illegally maintain a monopoly over the pods used in its new Keurig coffee brewers due to be released later this year.

TreeHouse and several other companies have made and sold pods for Keurig machines since some patents expired in 2012.

"We think (the lawsuit) is without merit," Kelley told Reuters.

Separately, Green Mountain plans to launch a machine later this year that makes cold beverages, and Coca-Cola Co (KO.N) has signed on as its first partner. The world's largest soda seller bought a 10 percent stake in Green Mountain for $1.3 billion.

Shares in Green Mountain closed down 2 percent at $117.94 on the Nasdaq. Nestle stock was flat at 65.75 Swiss francs.

(Editing by Bernadette Baum and Jonathan Oatis)

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