3 Coffee Stocks That Won’t Be Roasted by Spiking Bean Prices

coffee stocks - 3 Coffee Stocks That Won’t Be Roasted by Spiking Bean Prices

Source: Natee Meepian / Shutterstock.com

Coffee stocks have had a rough go of it recently. The coffee industry was one of the sectors that were hit hard due to the pandemic-induced slowdown.

According to National Coffee Association (NCA) survey, the first few weeks of the lockdown saw a healthy increase in coffee sales. However, sales took a significant dip in the second and third quarters, and coffee stocks underperformed the broader market by a considerable margin last year.

The post-pandemic environment is likely to benefit consumer packaged goods producers and coffee chains globally, but the International Coffee Organization (ICO) estimates an increase in coffee prices due to supply chain disruptions.

Coffee consumption around the world is expected to rise by 1.9% from 2020. Despite the persistent increase in coffee prices these coffee stocks have the potential to make impressive bull runs this year. The list includes the best performing coffee stocks which are poised for strong gains in the post-pandemic world.

  • Nestle (OTCMKTS:NSRGY)
  • Keurig Dr Pepper (NYSE:KDP)
  • Starbucks (NASDAQ:SBUX)

Coffee Stocks To Buy: Nestle (NSRGY)

A close-up of the Nestle (NSRGY) logo near a corporate office entrance.
Source: Jer123 / Shutterstock.com

Nestle is not exactly a coffee pure-play but offers coffee products under ten different brands. The diversified beverage company has been investing heavily in its coffee brands and witness a robust increase in revenues.

Earlier this year, the company announced a partnership with Starbucks. The coffee giants will develop ready-to-drink beverages under the Starbucks brand in Latin America, Southeast Asia and Oceania. These drinks are set to hit the market next year.

Moreover, the strong demand for Nespresso and Nescafé products has contributed to its massive net sales of $46.3 million in the first half of the year.

It saw a splendid 14.3% increase in revenues to $3.5 billion in Nespresso products in the first half of 2021. Moreover, its Starbucks deal is also likely to pay dividends for NSRGY stock in the future.

Nestle has the resources to continue improving the quality of its product offerings and expand its market share.

Keurig Dr. Pepper (KDP)

Keurig Dr Pepper (KDP) sign on the front of a building
Source: Shutterstock

Keurig Dr. Pepper soft is a key player in the soft drinks and beverages space with a hefty exposure to the coffee space operating over 30 different coffee brands.

Moreover, in total, it has a portfolio of 125 top brands and has held up well in the past year, generating a healthy 21.5% return.

KDP’s strong presence in the coffee segment is why it has higher margins compared to industry stalwarts such as Nestle and Pepsico (NASDAQ:PEP). It capitalizes on premiumization trends in the coffee sector to command its lofty gross margins of over 55%.

Moreover, the company continues to expand its portfolio to get ahead of its competition. For instance, in 2020, KDP acquired caffeinated sparkling water manufacturer Limitless. The company has a strong growth runway ahead, which the post-pandemic tailwinds will boost.

Starbucks (SBUX)

Learnin' From Luckin, Starbucks Stock Heats Up a Strategy
Source: monticello / Shutterstock.com

After a disappointing performance last year, Starbucks has returned to growth with strong comparable sales of 73% in its latest quarter.

The coffee giant generated $7.5 billion in revenue in its third quarter, posting a 77.7% year-over-year increase from the prior year period. SBUX stock continues to be an attractive investment with its superior product and unmatched customer loyalty.

Starbucks has come to form at the right time and is looking to ramp up its business to take advantage of the heightened consumer activity. It opened 352 new stores in its most recent quarter.

Active membership in Starbucks Rewards in the U.S. increased by 48% to $24.2 million for the quarter. With a solid operating margin of 24.4%, it has also raised its outlook for this year. Hence, it’s in spectacular shape to continue growing at a vigorous pace.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/3-coffee-stocks-that-wont-be-roasted-by-spiking-bean-prices/.

©2021 InvestorPlace Media, LLC