Redbox took out Blockbuster, will its $1 coffee take out Starbucks?

Feb 21, 2012

Perhaps Starbucks has gotten so good at making coffee without people that it sees brick-and-mortar coffee shops as a thing of the past - much how Redbox’s automated DVD dispensing helped usher in the demise of the video store.

Or, perhaps the deal it has struck with Bellevue-based Coinstar (which owns Redbox) to dispense Starbucks' Seattle’s Best brand coffee for a buck at every convenience store and street corner across the nation is just a way to make a … buck.

Whatever the future holds, Coinstar is hoping to change the way people think about vending-machine coffee.  The self-service retailer is testing machines that provide a cup of freshly-ground, drip coffee for a dollar. 

The New York Times reports that 500 Coinstar kiosks will serve Seattle’s Best brand coffee by the end of the year.  

When a visitor to its headquarters here dips a credit card into a coffee machine in the company cafeteria, the machine grinds a batch of beans and dribbles out a $1 cup of fresh coffee that tastes pretty close to a cup from any upscale coffee bar, the newspaper reported.

“Consumers love it because they don’t have a lot of time on their hands,” Mr. Davis, 54, told the Times over coffee dispensed by the new vending machine in Coinstar’s cafeteria. “We try to be where the consumer goes everyday.”

Seattle tech-news Website Geekwire reports that the company’s coffee kiosk ambitions actually date back to 2008.

“Starbucks Corp. is experimenting with selling espresso drinks from a machine, sans barista,” the Puget Sound Business Journal reported then. “The self-serve kiosks remove the labor costs of having a barista. Ehlers said customers pay 8 percent to 10 percent less than at a full-service espresso bar. The kiosks are smaller, too, Ehlers said, making them a better fit for grocery stores with space constraints.”

The coffee machines are the latest in Coinstar’s efforts to diversify its business beyond movie rentals and coin-counting. 

New deals brewing

Redbox two weeks ago announced a new partnership with Verizon to develop a combined DVD rental and movie streaming subscription service.

The Wall Street Journal reported that the wireless carrier's foray into the DVD and streaming rental business could put pressure on Netflix. Here’s the WSJ exploring the topic on WSJ Live:

The chain has several other ideas in the works. “Gizmo” kiosks, which sell used video game consoles, iPads, and other electronics, are being tested in Texas and California.

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