Starbucks is to start selling its branded coffee through Kraft\'s "Tassimo" homecoffee machines as footfall in its US stores slows and Americans return to drinking coffee at home. This is the first time that Starbucks, which has contracted Kraft to distribute its packaged coffee in supermarkets, has sold coffee under the Starbucks brand name for use in home coffee machines.
Starbucks is to start selling its branded coffee through Kraft's "Tassimo" homecoffee machines as footfall in its US stores slows and Americans return to drinking coffee at home.
This is the first time that Starbucks, which has contracted Kraft to distribute its packaged coffee in supermarkets, has sold coffee under the Starbucks brand name for use in home coffee machines.
Food companies such as Kraft and Nestle have been trying to compete with coffee chains by developing machines that can brew expressos and cappuccinos at home.
Total sales of these so-called "pod" systems - the machines use small pods of ground coffee and also take tea and hot chocolate - rose to Dollars 99m in 2006 from just Dollars 8m in 2001, according to research from Datamonitor and the National Coffee Association.
Starbucks, which continues to expand aggressively with 2,400 store openings around the world this year, is starting to find it more difficult to persuade new customers to come into its coffee shops in its home market.
Last month, it said traffic through its US stores grew less than 1 per cent in the third quarter, blaming the weakness on lower consumer spending as people went out less.
Meanwhile, more Americans are drinking coffee at home today than they were a year ago, suggesting that the popularity of coffee chains may be waning.
Some 77 per cent of coffee consumers drink at home today compared with 74 per cent a year ago and 81 per cent in 2001, according to the US National Coffee Association.
The agreement between Starbucks and Kraft is likely to be mutually beneficial.
Kraft has been trying to improve the quality of coffee it sells to revive declining sales of ground coffee in the US and Europe.
It has overhauled its Maxwell House brand, packaging it in new large square plastic containers, and now uses only arabica beans.
Mary Beth Stone West, president of Kraft North America Beverages, said: "It's about reinventing mainstream coffee."
However, the new packaging has already provoked competitor Procter & Gamble to file a lawsuit against Kraft, alleging that the owner of Maxwell House has infringed a patent on the plastic containers in which it sells its Folgers coffee brand.
Kraft and Starbucks have also been trying to create a "virtual cafe" experience for consumers in supermarkets by creating special coffee sections that evoke the feel of a coffeeshop.
The new aisles have been created in some 2,000 supermarkets in the US and Kraft hopes to have them in 4,000 by the end of next year.
Wendy Pinero, vice-president of Starbucks's global consumer products business, said demand was increasing for the company's "at home" products, which included packaged coffees sold in supermarkets.