Nestle’s Coffee Mate to Work With Keurig Green Mountain

Nestle SA plans to make Coffee-Mate branded capsules that are compatible with Keurig Green Mountain Inc. machines in the U.S., bringing the world’s biggest coffee maker onto a rival’s system.

The two companies will start selling the capsules, known as K-Cups, in the U.S. in the fall, they said in a Business Wire statement today. The packs will come in original and French Vanilla flavors and include both coffee and creamer.

Nestle, which gets about a fifth of its $100 billion sales from java, has struggled to grow Nespresso in the U.S. The company this year introduced a new type of machine to appeal to Americans who prefer a larger cup of coffee than Europeans.

Today’s move is an “example of Nestle looking to crack the U.S. single-serve market on multiple fronts after its Dolce Gusto system largely failed in a first step,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich.

Nestle began selling its Dolce Gusto brand in the U.S. in 2010, several years after Nespresso’s entry. Dolce Gusto can make more varieties of milk-based drinks.

Nespresso had about 3 percent of the U.S. single-serve market compared with Keurig Green Mountain’s 72 percent, according to Euromonitor data cited in a Sanford C. Bernstein research report last year.

The global coffee market has been consolidating, with D.E Master Blenders 1753 BV agreeing this year to combine with the coffee business of Mondelez International Inc. That creates a headache for Vevey, Switzerland-based Nestle, whose coffee business has slowed of late amid an influx of private-label rivals in its core European market for Nespresso.