Starbucks profits up 29% last quarter

A Starbucks coffee cup and beans are seen in this photo taken in Washington, D.,C.

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.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.
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I’m so glad to see that this story being covered. It strikes me as interesting that, in this economic climate, so many of us are willing to spend 5-6 times the cost of an out-of-the-bag cup (Not to mention the material wastefulness of the K-Cup.)

Also interesting is Starbucks's entrance into the K-Cup market considering their commitment to solving their paper cup problem and making all cups recyclable in their stores by 2015. I wonder how recyclable a K-Cup is, and whether they actually get recycled.

I wrote about it this story on my own blog, Throwaway Nation, dedicated to kicking the single use disposable habit. http://bit.ly/u26aEU.

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