Green Mountain Coffee Roasters (GMCR)

We may not be able to enter into license agreements with suppliers to manufacture K-Cups or maintain our current license agreements, or it may be expensive to do so.

We license the right to manufacture and market K-Cups on an exclusive or non-exclusive basis to gourmet coffee roasters and tea packers in return for royalty payments from the licensees when they ship the K-Cups. Although many licensees are willing to enter into such licensing agreements, we cannot assure you that such agreements will be negotiated on terms acceptable to us, or at all. The failure to enter into similar licensing agreements in the future could limit our ability to develop and market new products and could cause our business to suffer.

We also have an exclusive licensing agreement with Newman’s Own Organics. We produce a line of several co-branded Newman’s Own Organics coffees under the Newman’s Own Organics and Green Mountain Coffee Roasters brand names. The failure to maintain this license agreement could cause our business to suffer.

Increases in the cost of materials used to produce our brewers or the cost of high-quality Arabica coffee beans or could reduce GMC’s gross margin and profit.

Cyclical swings in commodity markets are common and 2008 was an especially volatile year, with the “c” price of coffee climbing to record levels until mid-year, then declining with most other commodity markets in the second half of calendar 2008. It is expected that coffee prices will remain volatile in the coming years. In addition to the “c” price, coffee of the quality sought by GMC tends to trade on a negotiated basis at a substantial premium or “differential” above the “c” price. These differentials also are subject to significant variations and have generally been on the rise.

We generally try to pass on coffee price increases and decreases to our customers. There can be no assurance that we will be successful in passing on these cost increases to customers without losses in sales volume or gross margin. Additionally, if higher green coffee costs can be offset on a dollar-for-dollar basis by price increases, this trend still lowers our gross margin on a percentage of sales basis. Similarly, rapid, sharp decreases in the cost of green coffee could also force us to lower sales prices before realizing cost reductions in our green coffee inventory and purchase commitments.

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Significant fluctuations in the cost of other commodities such as steel, petroleum and copper also influence prices of plastic and other components used in the manufacturing of our coffee brewers. Approximately 90% of Keurig brewers shipped in fiscal 2008 were sold to the At Home channel at our cost with essentially no gross margin. With respect to the Keurig single-cup At Home system, we are continuing to pursue a market penetration model and are focused on driving new customers into the single serve segment. Any rapid, sharp increases in the cost of At Home brewers would likely lead us to not raise sales prices to offset such gross margin dollar declines as our current strategy is to drive penetration and not risk slowing down the rate of sales growth to competitors or before realizing cost reductions in our green coffee inventory and purchase commitments. There can be no assurance that we will able to maintain our gross margin when such fluctuations occur.

We may not be able to enter into license agreements with suppliers to manufacture K-Cups or maintain our current license agreements, or it may be
expensive to do so.

We license the right to manufacture and market K-Cups on an exclusive or non-exclusive basis to gourmet coffee roasters and tea
packers in return for royalty payments from the licensees when they ship the K-Cups. Although many licensees are willing to enter into such licensing agreements, we cannot assure you that such agreements will be negotiated on terms acceptable to us,
or at all. The failure to enter into similar licensing agreements in the future could limit our ability to develop and market new products and could cause our business to suffer.

We may not be able to enter into license agreements with suppliers to manufacture K-Cups or maintain our current license agreements, or it may be expensive to do so.

We license the right to manufacture and market K-Cups on an exclusive or non-exclusive basis to gourmet coffee roasters and tea packers in return for royalty payments from the licensees when they ship the K-Cups. Although many licensees are willing to enter into such licensing agreements, we cannot assure you that such agreements will be negotiated on terms acceptable to us, or at all. The failure to enter into similar licensing agreements in the future could limit our ability to develop and market new products and could cause our business to suffer.

We also have an exclusive licensing agreement with Newman’s Own^® Organics. We produce a line of several co-branded Newman’s Own^® Organics coffees under the Newman’s Own^® Organics and Green Mountain Coffee Roasters^® brand names. The failure to maintain this license agreement could cause our business to suffer.

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