Starbucks says these are the early days of single-serve coffee business

Starbucks CEO Howard Schultz squelched rumors Thursday that the coffee chain is on the verge of buying Green Mountain Coffee Roasters, a company known for a machine that allows people to brew a single cup using small ground-coffee inserts known as K-Cups.

Schultz instead indicated that he's ready to take on the single-serve wonder from Vermont, which two years ago bought the wholesale business of Tully's Coffee. Despite great success with K-Cups, Green Mountain is considerably smaller than Starbucks, with a market capitalization of $5.7 billion compared with Starbucks' $30 billion.

"Green Mountain has done a very fine job introducing single-serve brewer technology to the U.S. market. And as a result it has emerged as an early leader. But as I have said, these are very early days, and history has demonstrated time and again that patents alone do not determine market winners — deep customer engagement, best-in-class experiences and quality do," Schultz said in a memo to executives.

Speculation ramped up early this week that Starbucks planned to buy Green Mountain. Starbucks has said it wants to make acquisitions with its plentiful cash, and with a long-term relationship with Kraft ending March 1, some people thought it might be poised to buy Green Mountain to replace a similar technology from Kraft called T-discs.

Green Mountain's stock surged to an all-time high on the rumors Monday.

The shares quickly deflated on Tuesday when Starbucks made its single-serve- coffee announcement: It will provide single-serve packages of ground coffee for single-cup brewers in half a million hotel rooms across the United States.

Shares of both companies dropped Thursday. Green Mountain stock fell 7.7 percent, to $40.71, and Starbucks dropped 0.2 percent to $33.50.

Melissa Allison: 206-464-3312 and mallison@seattletimes.com