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Green Mountain Coffee Roasters Inc. (GMCR), Starbucks Corporation (SBUX), Dunkin Brands Group Inc (DNKN): A Hot Coffee Deal in Town

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Green Mountain Coffee Roasters Inc. (GMCR)Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has yielded year-over-year capital appreciation of 260% to its investors. Thanks to a remarkable growth in its K-Cup packs and Keurig brewers, it has shown a great deal of promise during the last few months. However, the real question is: Will it keep on doing wonders in the future as well?

Recent developments: Lipton K-Cup packs

After enjoying great success in coffees, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has decided to expand its K-Cup packs to the tea market. Green Mountain and America’s favorite tea brand, Lipton, have gone through a partnership, allowing Keurig brewers to enjoy Lipton’s hot and iced tea varieties, now available in K-Cup packs. Lipton K-Cups are coming in three unique combinations; Lipton Refresh, Lipton Indulge and Lipton Soothe.

Cinnabon K-Cup packs and more

Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has recently announced that it’s going through a multi-year agreement with the maker of world famous cinnamon rolls, Cinnabon, enabling the company to bring “Cinnabon Classic Cinnamon Roll K-Cup packs” for the Keurig single-brewing system. Cinnabon K-Cup packs are all set to be launched on Green Mountain’s website during the holiday season.

Lately, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) also introduced its special “Costa Rica Finca El Quizarrá White Honey Special Reserve Coffee.” The “honey washed” coffee is made from Red Catuai and Caturra varieties, known all over the world for their exemplary cup quality.

As sweet, bright coffees are getting more popular, this latest addition to Green Mountain’s reserve coffees was always on the cards, the company said.

Going forward

Among these new deals, Lipton K-Cup packs would have the biggest effect on Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s sales. According to Mintel‘s Tea and RTD report, the U.S. tea market is expected to grow more than 50% by the end of 2016, making it one of the biggest beverage markets in the U.S. As Lipton is one of the leading tea brands in the world, its K-Cup packs for Keurig brewers should bring incremental revenue for the company in the future.

With Cinnabon still the market leader in cinnamon-roll bakeries, its K-Cups would further add to Green Mountain’s growth prospects. Besides this, Green Mountain has already extended its partnership with Starbucks Corporation (NASDAQ:SBUX). As Starbucks Corporation (NASDAQ:SBUX) is the market leader in the U.S. coffee industry, Green Mountain’s recent agreement with Starbucks Corporation (NASDAQ:SBUX) would enable Starbucks Corporation (NASDAQ:SBUX) to sell more K-Cups for Keurig’s coffee makers, enhancing Green Mountain’s sales.

According to “The NPD Group“, Dunkin Brands Group Inc (NASDAQ:DNKN) serves the most hot and iced coffee in America. Globally, the company sells more than 1.7 billion cups of coffee every year. As Dunkin Brands Group Inc (NASDAQ:DNKN)’ K-Cup packs are already available for Keurig, Green Mountain’s future looks secure as ever.

Valuation

Since the beginning of 2013, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’ share price has gone up by almost 38%, reflecting a great deal of confidence among its investors. Green Mountain is trading at a low forward price-to-earnings ratio of 21.6, making it a relatively cheap buy in the coffee industry. A low PEG of 1.1 shows that it’s still an undervalued stock. According to the sell side, Green Mountain has a high target price of $95, depicting an upside potential of 20%.

Coffee industry’s major players

The world’s most renowned coffee company, Starbucks Corporation (NASDAQ:SBUX), has chosen Google to provide the next generation Wi-Fi facility to its customers. As a result, Starbucks Corporation (NASDAQ:SBUX)’ customers would be able to enjoy a 10 times faster network. During the next 18 months, the company has plans of upgrading more than 7,000 stores to the new Wi-Fi facility. As huge number of people come to Starbucks to work, study, or connect with friends; a high-speed Internet is of foremost importance to the company’s revenue.

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