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Green Mountain Coffee Roasters (GMCR) |
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WIKI ANALYSIS
Green Mountain Coffee Roasters (NYSE: GMCR), headquartered in Waterbury, Vermont, provides premium, specialty coffees and coffee products. GMCR operates in two business segments: Green Mountain Coffee Roasters (ground coffee and coffee beans) and Keurig (the "one-cup coffee brewer"). In the past fiscal year, the firm has profited from the increased popularity to its Keurig business. However, coffee bean prices, the primary commodity input for GMCR, rose 72% in 2010,[1] which caused the firm's profit margin to decline 15%.[2]
Business Overview
In the past fiscal year, the success of the Keurig brand has driven GMCR sales, as the firm saw an 81% sales growth in its Keurig products.[2] Coffee prices have been surging since January 2010, causing GMCR profit margins to further tighten.
Trends and Forces
GMCR Profit Margins Pressured by Coffee Bean Prices
Green Mountain Coffee Roaster has a high dependence to its primary raw material: coffee beans. As the price of coffee beans, typically imported from Latin and South America, Southeast Asia, and Africa, rises, GMCR needs to pass these costs to consumers or create a more efficient production process to avoid lower profit margins.
Keurig's Niche Product Drives New Revenue Streams
Green Mountain Coffee owns the Keurig one-cup coffee maker business -- a niche product in an industry traditionally composed of coffee pot brewers and cafes. As the one-cup style of coffee making gains popularity, the firm can leverage its brand recognition to expand the business. For example, when GMCR announced it will sell Starbucks (SBUX) coffee in Keurig's patented K-Cup, the firm's stock increased 41%.[3]
Competition
GMCR's competitors include:
- Starbucks (SBUX): The world's top coffee seller by revenue, Starbucks also sells in-house brewed coffee and other food products.
- Peet's Coffee & Tea (PEET): Similarly to Starbucks, PEET focuses on its in-house brewed coffee.
- Dunkin' Donuts (privately held): Sells coffee and tea products, but doughnuts and food products as well.
- The Folger Coffee Company: Like GMCR, Folger sells coffee beans and ground coffee to be brewed at home.
References
- ↑ Commodity Online, "Global coffee prices to go high on 2011," 12/23/2010
- ↑ 2.0 2.1 GMCR 2010 10-k
- ↑ Seeking Alpha, "A Nasty Week and a Highly Caffeinated Short," 03/11/2011
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