Starbucks Corp will team up with Green Mountain Coffee Roasters Inc to take on the fast-growing single-serve market.
The companies will sell Starbucks coffee and Tazo teas pods for Green Mountain Coffee Roasters Inc's popular Keurig machines at wholesale clubs, drugstores and grocery stores in North America starting this autumn.
The announcement ended speculation that Starbucks would debut its own single serving brewer and compete with Green Mountain in the segment both companies said is the primary source of growth for the U.S. coffee industry.
The announcement follows a Reuters report last month that the two rivals would join forces in the booming $4 billion U.S. single-cup coffee segment.
Early in 2012, Starbucks cafes will begin selling Green Mountain's Keurig brewers as well as Starbucks coffee and tea pods. Before that, the pods, known as K-cups, will be sold by supermarkets and other retailers in the United States and Canada.
Starbucks will be the exclusive licensed super-premium brand for the Keurig brewer for the length of the deal. The companies did not disclose terms.
Starbucks, the world's largest coffee company, has been looking to expand beyond its namesake cafes and wants to be a big player in the new and fast-growing single-serve coffee segment.
Green Mountain's Keurig enjoys a near monopoly in the U.S. single-cup coffee sector, with more than 80 percent market share, beating out rivals including Kraft's Tassimo machine, Sara Lee's Senseo brewer and Nestle SA's Nespresso system, which leads in Europe.
Many U.S. office workers are familiar with Keurig because the machines -- which allow users to make one cup of the coffee or tea of their choice at a time -- are a common fixture in company break rooms.
Starbucks on March 1 terminated an agreement by which it provided coffee discs for Kraft Foods Inc's Tassimo one-cup home brewer. At the same time it ended its grocery distribution agreement with Kraft.
Starbucks entered the single-cup U.S. coffee market in September 2009 with the launch of its Via instant coffee. Some analysts think sales of Via could hit $1 billion globally by 2015.
Green Mountain shares were up 10 percent at $48 in thin premarket trading. Starbucks were up 1.3 percent at $35.
(Reporting by Lisa Baertlein and Phil Wahba; Editing by Derek Caney)