Starbucks profits up 29% last quarter
Jeremy Hobson: We’ve got earnings this morning from Starbucks, which says profits were up 29 percent last quarter. Like other multinational companies, Starbucks is benefiting from sales overseas. But the company is betting future growth not on ventis and grandes, but on a tiny little cup — about the same size as an espresso.
Marketplace’s Eve Troeh reports.
Eve Troeh: More coffee drinkers are brewing a single cup, instead of a whole pot. To do it, they use special machines that use a plastic pod with the coffee sealed inside.
It’s a K-Cup, and it’s a business worth $4 billion a year right now. It’s the fastest growing thing in the coffee market.
One company — Green Mountain Coffee — has had a virtual monopoly on that market. It partnered with Starbucks earlier this year. This month Starbucks has its coffee inside those little plastic K-Cups for the first time.
Bill Chappel is an analyst at SunTrust Robertson Humphrey. He says that will help Starbucks get more people drinking its coffee at home. And, at a higher price point per cup.
Bill Chappel: You sell a bag of coffee, it typically runs you about 6 to 10 cents per cup of coffee. These K-Cups, Starbucks will be selling them for somewhere between 75 and 85 cents per K-Cup.
Starbucks’consumer products division says K-Cups can earn the company a billion dollars, eventually.
I’m Eve Troeh for Marketplace.
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