Green Mountain Coffee Roasters
Why Left for Dead? Specialty coffee and coffee maker Green Mountain (GMCR) was actually flagged for death back in 2011 by InvestorPlace’s Will Ashworth, in the middle of a stupendous crash. The stock had risen from a split-adjusted $8 per share to more than $100 per share in September of 2011 before crashing back down to $45 by the end of the year.
The impetus for the sell-off? Its Keurig single-serving coffee pods patent was expiring in 2012, and competition for that pod platform was increasing as a new entrant — privately held Rogers Family — starting selling its pods through Costco (COST) and Safeway (SWY). Oh, and hedge fund manager David Einhorn was already looking to short the stock.
What’s Changed? Everything but the original concept of the single-serving pod. Most importantly, GMCR has found a way to peacefully co-exist with the industry’s 800-lb gorilla: Starbucks (SBUX). The companies first entered into a partnership agreement in 2011 to make and sell Starbucks and Tazo-brand pods for use in the Keurig system. The partnership’s value was more than 850-milllion Starbucks coffee K-Cup packs sold for use in the Keurig system.
The agreement has been extended, and now Starbucks is the exclusive premium brand coffee for the Keurig K-Cup and GMCR’s Vue platforms, and GMCR now carries a wide and popular lineup of coffee and tea products for its still popular delivery system.
Long Term Prospects: GMCR’s moves are paying off: Single serve K-Cup revenues improved 21% on a year-over-year basis in Q1, and GMCR projects 11% to 14% revenue growth for the full year, with an EPS growth rate of 27% to 31%.
Verdict: Not only do I like the coffee and the coffee delivery system, I like the stock for the long term, too.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he does not hold a position in any of the aforementioned securities.