Green Mountain Coffee Roasters (GMCR)

Compensation Consultants and Benchmarking

During fiscal 2007, we engaged Mercer to assist us in benchmarking and assessing our overall compensation package against market standards. The Compensation and Organizational Development Committee’s purpose in requesting this analysis was to ensure that its compensation practices are competitive in the marketplace and to identify areas where our compensation program could be advanced. The Mercer report used a composite of survey data, which, based on discussions with management and the Committee, represented organizations similar in nature to the Company. The survey data used focused on comparable companies in the manufacturing non-durable goods sector with revenues of $300M—$400M. For Mr. Lazaris, the President of Keurig, we also included survey data reflecting high-technology companies with revenues less than $300M. The surveys used in Mercer’s analysis were Mercer, Executive Compensation Survey, Watson Wyatt/ECS Top Management Survey and The Survey Group Compensation Survey.

The Mercer report provides benchmarking data for the base salary, annual incentives, equity and total compensation paid to each named executive officer against the 25th, 50th and 75th percentiles of the composite survey data. The compensation philosophy adopted by the Compensation and Organizational Development Committee targets total compensation at the 50th percentile (market median) as a guideline for making compensation decisions. The Compensation and Organizational Development Committee reserves the flexibility to pay the executives above or below the targeted compensation philosophy based on the executive’s experience, criticalness to the business strategy and year-over-year performance and we discuss any such decisions on an individual basis in the following sections.

To supplement the Mercer composite survey data, the Compensation and Organizational Development Committee also looked at the compensation levels at Starbucks Corporation, Peet’s Coffee & Tea and Caribou Coffee Company as a general reference point for the compensation paid to our named executive officers and found that they were paid competitively with the latter two companies.

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