Dive Brief:
- Keurig Green Mountain signed a deal to bring Kraft Foods' coffee brands to its K-cup brewing machine.
- The deal covers Kraft-owned brands Maxwell House, Yuban, and Gevalia, and McDonald's McCafe. Kraft announced last week it had landed a deal to distribute to bags of McCafe to grocers.
- Wall Street loved the deal. Shares of Keurig leaped 13% on the news, to their highest level in the company's history.
Dive Insight:
News of the Kraft tie-up came just days before the anticipated launch of the new generation of Keurig brewers, which Keurig said are designed to work only with licensed K-cups. That has angered some manufacturers of counterfeit coffee pods, most notably TreeHouse Foods, which makes unlicensed, private label K-cups. TreeHouse has announced it has already found a way to make K-Cups that will work with the new brewer and filed a lawsuit against Keurig demanding the right to do so.
That leaves two possible ways to interpret the Kraft deal. Under one scenario, Keurig is worried about the TreeHouse lawsuit and is offering very generous terms to companies who produce licensed pods. Under the second, Keurig isn't worried, nor is Kraft. And the terms of the contract are no more or less generous than normal.
Since the actual terms of the deal were not released, it's impossible to say which of these is true. Although Wall Street's love for the Kraft tie-up suggests the market is voting for the second possibility.