Green Mountain Coffee Roasters, Inc. (GMCR)

NetscribeConsGds (96.11) Submitted: 5/31/07 7:39 AM : Start Price: $22.60 GMCR Score: 80.70

Mint Green with Green Mountain Coffee Roasters!!!





The above statement definitely holds true for this coffee company. Green Mountain Coffee Roasters (GMCR) delivered robust results in the second quarter of fiscal 2007 as revenues jumped by 66.8 percent thanks to the success of Keurig single-cup brewing system and K-Cups. Company reported higher net income in the second quarter of 2007, the primary reason being the leverage in SG&A expenses. Albeit, Keurig acquisition has raised the company’s interest expenses significantly, management expects the acquisition to be accretive to fiscal 2007 earnings backed by Keurig’s tremendous ability to generate sales.





This acquisition is one of the most notable corporate actions for GMCR considering Keurig’s strong licensing pacts as well as their dominance in the home market. Most of the revenues of GMCR are generated from supermarkets and convenience stores and food service outfits like restaurants, hotels and business offices. Interestingly, Keurig is pitching hotel chains to offer it’s single cup brewing system with one of the recent example being Loews.





To make the story more interesting, GMCR has started offering hot cocoas in the K-Cups. Also, the company has enhanced its offering by introducing a new line of Extra Bold K-Cups that contain over 20 percent more ground coffee than the regular K-Cups. One of the threats for GMCR is the tightening supply of Arabica beans by Brazil owing to the forecasted decline in the crop. As Arabica bean is the primary raw material, its scarcity could cause margin pressures for GMCR. However, by and large, factoring the rapid business actions, the stock looks a good investment proposition.

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