Green Mountain Coffee Roasters Inc. (GMCR): Gone as High as It Can Go?

Page 1 of 2

Green Mountain Coffee Roasters Inc. (GMCR)Single-cup coffee maker Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has defied skeptics like myself who thought its business was more stale than day-old joe after the patents expired on its K-Cup dispensers.

Not that the stock didn’t crater. After peaking at well over $100 a share in 2011, shares tumbled into the mid-teens last year, but they have shown surprising resilience and were recently as high as $83 a stub. Not bad for a business model thought to have as much strength as a used coffee filter.

Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s stock has now pulled back about 17% from those highs, and while I’ve been a longtime bear on the company, I think it’s once again gotten as good as it’s going to get.

Sip on this
The argument for greater growth looks good on the surface. Even after the entrance of competitors into the coffee pod market, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) still owns about 60% of the single-serve market with the rest of the market bunching up in the mid-teens. Starbucks Corporation (NASDAQ:SBUX) is a distant second at 18% and The J.M. Smucker Company (NYSE:SJM) is third at 16% (in addition to its jams and jellies, Smucker owns coffee names Folgers and Millstone).

The folks at Packaged Facts think the market could expand further. The overall coffee market grew 10% last year, driven largely by an 82% increase in the single-serve segment to $1.8 billion, and even better, they see the possibility of it driving higher to $5 billion by 2016.

Analysts at Rabobank concur. Where Nestle SA Reg Shs. Ser. B Spons (ADR) (OTCMKTS:NSRGY) owns half the single-serve brewer market (Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s Keurig and Vue has almost a quarter of the market share), it says coffee pods represent 14% of all at-home consumption.

Going cold
Yet as a check on the enthusiasm, the analysts say it’s not in the name-brand niche that the greatest growth will be seen, but rather in the private-label business. While single-cup brews had blowout growth, private-label K-Cups will run from $125 million this year to over $750 million by 2016, an 80% compounded growth rate compared to a projected 28% to 29% rate for the single-serve market overall.

That’s borne out by the slowdown The J.M. Smucker Company (NYSE:SJM) has experienced, where it had incremental sales of $30 million for six straight quarters, only to see it plunge to $11 million last time out. The cause, said Smucker, was the proliferation of “unlicensed participants,” those dratted private-label K-Cup makers.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!