Shares of coffee giant
) reached a 52-week high of $63.19 on Friday, May 10, following
its announcement of the expanded K-Cups distribution deal with
Green Mountain Coffee Roasters, Inc.
). The deal is expected to further strengthen Starbucks' presence
in the premium coffee market.
Starbucks beat its previous high reached late last month on
the back of strong earnings results for the second quarter of
fiscal 2013. Starbucks also upped its earnings guidance for
fiscal 2013, while retaining its sales, comps and operating
The closing price of the coffee maker on May 10 was $63.10,
representing a solid 1-year return of about 16.5% and
year-to-date return of about 15.5%. Average volume of shares
traded over the last three months stands at approximately
Starbucks and Green Mountain have announced a new minimum
five-year agreement under which Starbucks will triple the number
of Starbucks products that can be run on Green Mountain's Keurig
brewers. Under the existing agreement, Starbucks manufactures and
sells Starbucks-branded single serve Vue and K-Cup packs to be
used on the Keurig platform. Keurig is an exclusive single-cup
machine which makes Starbucks coffee and Tazo tea.
Under the new expanded agreement, Starbucks will supply other
brands including Seattle's Best Coffee, Torrefazione Italia
coffee, Teavana Teas, and Starbucks Cocoa in addition to the Vue
and K-Cup packs. The expanded agreement, which replaces the first
deal entered in Mar 2011, further strengthens Starbucks' position
in the premium single-cup coffee market.
The premium coffee segment now accounts for over 50% of the
total coffee sold in the U.S. grocery, drug, and mass channels.
Starbucks owns 28.2% share of premium coffee in these channels.
In the premium segment, premium single cup makes up 20% of the
market. Starbucks, through the VIA Ready Brew and Starbucks
K-Cups, commands almost 22% share of the premium single cup
market, which is a huge improvement from its zero presence in
this segment just a couple of years back. The long-term strategic
Green Mountain tie, together with the newly launched Verismo
at-home-coffee machine and the innovations around VIA and K-Cups
are expected to help Starbucks capture further share of this fast
growing market in the coffee industry. The premium single-serve
category is expected to become an $8 billion market globally.
Starbucks carries a Zacks Rank #2 (Buy). The company has
compelling growth drivers, like La Boulange bakery products,
Verismo at-home-coffee machine, Evolution Fresh juices, Teavana
tea and K-Cups portion packs, to sustain earnings momentum in the
Bloomin' Brands, Inc.
Cracker Barrel Old Country Store, Inc.
), both carrying a Zacks Rank #1 (Strong Buy), are other stocks
worth considering in this space.
BLOOMIN BRANDS (BLMN): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
GREEN MTN COFFE (GMCR): Free Stock Analysis
STARBUCKS CORP (SBUX): Free Stock Analysis
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