However, the Keurig seems to occupy a different market niche altogether: people making coffee at home or office workers who can’t afford to make a Starbucks run. The Rubi machine would be somewhat in-between, as no consumer and few offices would have one.
Perhaps Starbucks Corporation (NASDAQ:SBUX) is using its deal with Coinstar, Inc. (NASDAQ:CSTR) to test the waters. Just over a year after it agreed to terms with Green Mountain, Starbucks began making its own single-serve machine, the Verismo. Green Mountain bears have argued that competition from the Verismo could contribute to Green Mountain’s undoing. Likewise, if the Rubi is successful, could Starbucks enter the market as a competitor?
Further, coffee vending machines are not new — I walked by one every day on my college campus years ago. Readers may have seen them in the lobbies of hospitals or airports. Global Vending Machine Group lists nearly a dozen different models.
No single company has managed to make a solid business out of coffee vending, even though it has been tried. Those who argue in favor of Rubi must have faith that Coinstar’s vending know-how will allow it to succeed where others have failed.
Rubi isn’t Coinstar’s only hope
Although Coinstar is focusing its efforts on rolling out Rubi, the company has other concepts waiting in the wings: Orango will let consumers purchase refurbished electronics, such as tablets and video game consoles, from a vending machine.
Is there a market for such a machine? If Coinstar, Inc. (NASDAQ:CSTR) decides to push Orango, it would find itself competing with GameStop Corp. (NYSE:GME).
GameStop, perhaps realizing that its own business is threatened by technological shifts, has begun buying old electronics, refurbishing them and then selling them. On the company’s November earnings call, GameStop’s president noted that, in the stores where the refurbished electronics business has been emphasized, sales have “lifted 7%.” Evidently, that’s good enough, as the company intends to expand the initiative to other stores.
Buy or sell Coinstar?
Because of its high short interest, Coinstar could be an attractive buy in the short run. But in the longer term, things are a bit more complicated.
Someone looking to hold Coinstar shares for a long period of time should be confident that either: the company’s bears are wrong, and Redbox will not be going anywhere anytime soon; or that the company is not just Redbox, but a play on the growing trend of vending machine retail.
Both Coinstar bulls and bears should watch the company’s Rubi rollout. Success or failure in the venture could determine the company’s longer-term viability.
The article Can Rubi Save Coinstar? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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