GMCR: Still Percolating, Analyst Says

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David Evanson and Scott Van Winkle, Fall, 2011

Canaccord consumer analyst Scott Van Winkle maintained his BUY rating and $120 price target on Green Mountain Coffee Roasters despite growing competition in the form of Rogers Family Company’s plan to offer coffee portion packs for use in Keurig brewers. Mr. Van Winkle said:

“The reality is that this isn’t the first attempt to market a K-cup-like portion pack for Keurig brewers by a third party unrelated to GMCR, nor is it the last . . .The availability of San Francisco Bay OneCups and others that will certainly be coming won’t change the game in the US coffee industry. The major brands will continue to dominate and GMCR, contrary to some beliefs, doesn’t defend itself with intellectual property anymore, but rather its partnerships with the coffee brands that dominate the industry at grocery.”

He added, “The world of coffee brewing is changing at home and we believe the [single serve brewer] penetration won’t be a modest 20% or 25% of homes, as some assert, but 40% or 50% at a minimum . . .The real risk could materialize if Green Mountain and Keurig fail to stay ahead of the game on innovations in both its brewers and K-cups. Thus far, the company is delivering on the value proposition to partner brands that we believe are the foundation of its success. “