Updated Research Report on Keurig Green Mountain - Analyst Blog


On Mar 14, 2014 we issued an updated research report on Keurig Green Mountain Coffee Roasters Inc. ( GMCR ).

The company changed its name from Green Mountain Coffee Roasters earlier this month  to highlight both its main brands - Green Mountain coffee and Keurig brewers. However, Keurig Green Mountain retained its ticker symbol "GMCR" on the NASDAQ stock exchange.

Keurig Green Mountain Coffee Roasters continues to be a leader in specialty coffee and is recognized for its award-winning coffees and innovative Keurig Single Cup brewing technology. Moreover, the company plans to enter the water purification market in 2014. We believe these steps will further boost its earnings in the coming quarters

Additionally, the company is geared to enhance its Keurig single-cup brewing system with new innovations and technology in order to remain competitive, especially after its K-Cup patents expired in Sep 2012. New models like Keurig Vue, Keurig Vue V600, Rivo System have enabled it to maintain share in the single serve category.

To maintain its dominance in the single-serve brewing category, Keurig Green Mountain plans to launch Keurig 2.0 brewing machine in fall 2014. The brewer has an interactive readability technology that will work only with licensed pods.  Keurig 2.0 is expected to replace both K-Cup and Vue brewers at consumer-friendly price points within a year of its launch.

Moreover, the company is stepping into the world of cold beverage and soda with the launch of The Keurig Cold Machine in 2015. The new machine will make sodas, sports drinks and other beverages at the touch of a button. Like its coffee machines, the cold machine would use pods to make a variety of soft drinks.

The company entered into several strategic agreements with other coffee and beverage companies like Starbucks Corp. ( SBUX ), Unilever plc ( UL ), Eight O Clock, Dunkin Brands Group Inc. ( DNKN ) to offer the signature drinks of these companies in Keurig Green Mountain's K-cups and Vue packs. Such deals bolster the company's goal of sustaining its dominance in the single-serve brewing world.

In order to increase the brand power of its cold beverage brewer, Keurig Cold, the company has inked a 10-year partnership deal with the beverage giant The Coca Cola Company. Per the deal, Keurig Green Mountain will exclusively make Coca-Cola branded pods for use on its cold beverage system. Coca-Cola will also work with Keurig Green Mountain on the development and launch of this latest version of Keurig single-cup brewer. The strategic relationship will aid the cold beverage product launch and provide it a strong platform for global growth

However, Keurig Green Mountain's revenues are highly dependent on one-cup Keurig brew systems and the K-Cup coffee packages that go with them. Moreover, slow job growth, high interest rates and tightened credit availability continue to hurt consumer discretionary spending. As a result, the consumer preference has shifted toward low-priced products which can hurt the company's margins in the future. Also, we would like to see significant top-line improvement before becoming more positive on the stock.

Currently, Keurig Green Mountain Coffee Roasters has a Zacks Rank #4 (Sell).

DUNKIN BRANDS (DNKN): Free Stock Analysis Report

KEURIG GREEN MT (GMCR): Free Stock Analysis Report

STARBUCKS CORP (SBUX): Free Stock Analysis Report

UNILEVER PLC (UL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: DNKN , GMCR , SBUX , UL



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