GMCR Shows Strong Sell-Through Data

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David Evanson and Scott Van Winkle

Forbes.com, Fall, 2011

Following the Green Mountain Coffee Roasters (GMCR) rally yesterday on the circulation of strong brewer sell-through data, supportive commentary from Starbucks (SBUX), and investor access to management, Canaccord Genuity consumer analyst Scott Van Winkle reiterated his BUY rating and $94 target on the company. Mr. Van Winkle said:

“We expect several years of rapid growth, driven by rising penetration of Keurig single-cup coffee makers in coffee-drinking households that should drive higher revenue growth and even higher rates of earnings growth as the margin story unfolds.”

Regarding investor access to management, Mr. Van Winkle noted, “. . .we generally believe that the company’s availability to investors after such a tumultuous time has in itself benefitted investor confidence. Management answered questions and fell on the sword, as it did on the Q4 conference call, for mis-forecasting K-cup shipments in Q4.”

And regarding cash flow, he added, “We believe that investors don’t realize that GMCR’s model is highly capital intensive during these periods of rapid growth. Of course that’s obvious given the cash flows, but the foundation of why it is so capital intensive is not broadly considered, in our opinion. Not only must the company invest in [capital expenditures] to fulfill its portion pack needs and be able to service its partners, but the working capital investment is significant.”