Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Green Mountain Coffee Roasters, Inc. (NASDAQ:GMCR)

F1Q09 (Qtr End 12/27/08) Earnings Call

January 28, 2009 05:00 pm ET

Executives

Frances G. Rathke – President & Chief Financial Officer

Larry Blanford – President & Chief Executive Officer

Michelle V. Stacy – President of Keurig

R. Scott McCreary - Chief Operating Officer

John Whoriskey – General Manager, At Home

Jim Travis – Vice President of Sales

T.J. Whalen – Vice President of Marketing at Green Mountain Coffee

Analysts

Scott Van Winkle – Canaccord Adams

Alton Stump – Longbow Research

Mitch Pinheiro – Janney Montgomery Scott.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

John Anderson – William Blair

William Chappell, Jr. - SunTrust Robinson Humphrey

Operator

Good day everyone, welcome to the Green Mountain Coffee fiscal 2009 first quarter financial results conference call. Today's program is being recorded. At this time for opening remarks and introductions I would like to turn things over to the Vice President and Chief Financial Officer, Ms. Frances G. Rathke. Please go ahead, ma'am.

Frances G. Rathke

Thanks Kelly. Welcome everyone. If you have not received the earnings release, it is on our website at www.gmcr.com. Also on our website are slides that summarize much of the information on this conference call. You could access them through the same link as our webcast from the Investor Services page of our website and I'd urge you to view them as they contain key messages and data we are discussing today relating to our performance and prospects.

I want to remind everyone that certain statements will be made today, which are forward looking within the meaning of securities laws. Owing to the uncertainties of forward-looking statements, our actual results may differ materially from anything projected in these forward-looking statements. So, we can give no assurance as to their accuracy and we assume no obligation to update them. For further information on risks and uncertainties, please read the company's SEC filings, the paragraph in today's press release that begins with the words, certain statements.

We also request that you ask all of your questions on this call so that our answers are available to everyone. And now, I would like to turn the call over to our President and CEO, Larry Blanford.

Larry Blanford

Thanks, Fran. Joining Fran and me with prepared remarks on this call today are Scott McCreary, Chief Operating Officer of our Green Mountain Coffee business unit and Michelle Stacy, President of our Keurig business unit. After these remarks, our management team will be available to respond to your questions.

Following our excellent fiscal 2008 performance, it is exciting to be sharing outstanding results with you again today. Our success in the first quarter was driven as expected by continued growth and demand for our K-Cup portion packs up 55%, versus the same quarter last year. Importantly, strong brewer sales up a 121% versus prior year bolster our confidence in our single serve razor blade business model going forward. We believe these strong Keurig brewer sales are largely due to increasing consumer awareness of and interest in the convenience quality and value represented by the Keurig Single-Cup system. This positions GMCR as the leader in the early revolution of how consumers and over a 100 million North American households prepare and enjoy their coffee.

In an economic environment, where total U.S. retail sales for October through December 2008 are estimated to be down mid single-digits, GMCR's total net sales for the same period grew 56% from a $126.4 million in the first quarter of fiscal 2008 to a $197 million in the first quarter of 2009. Our net sales growth of 56% does include both wholesale and retail sales. So, there cannot be a direct comparison to retail, yet the point is important. GMCR is continuing to attain significant sales growth during one of the most challenging economic times our country has faced.

Along with strong sales growth, we also exceeded our earnings estimates for the first quarter. Cost management and operating leverage continue to be very important and our efforts to improve efficiencies nearly offset an expected first quarter decline in gross margin. As I have shared previously, our multi-channel marketing strategy presents consumers with opportunities to enjoy our great coffees wherever they are, at convenience stores, in fine restaurants, at the workplace, in hotel rooms, and at home. Supported by the Keurig Single-Cup system cross channel marketing helps grow awareness of our brands and our great tasting coffees.

In our first fiscal quarter of ’09, we had a number of channel wins. We extended our 2005 agreement with McDonalds to sell our coffee in over 600 of their restaurants in New England and Upstate New York. We also brought on Friendlys as a new customer selling Green Mountain Coffee in close to 340 corporate owned restaurants and franchise locations. We anticipate an additional 60 Friendlys franchisees will make the switch to our coffee this quarter. And as Scott will be detailing, we expanded our supermarket distribution of Keurig Brewers and K-Cup portion packs.

We also have continued putting in place enabling the initiatives that will drive our future growth. In order to fulfill the increasing demand for K-Cups we have been continuing to invest in roasting, packaging, and distribution capacity both in Vermont and in our New Knoxville facility. We continue preparing for a fast start to leverage the opportunities we expect from our pending acquisition of the Tully’s brand and wholesale business. And we continue to build our organization.

In this regard, I want to highlight how pleased our Board of Directors and executive management team are to have Howard Malovany join GMCR as General Counsel and Secretary. Howard joins us with 30 years of corporate legal experience, most recently serving at Wrigley as General Counsel and Board Secretary for the past 10 years. His broad legal and consumer packaged goods business experience, team approach to management, and his understanding of successful companies and their cultures represent a great fit with the needs of our growing company.

Another highlight of our first quarter announced at the very beginning of our fiscal year is GMCR’s innovative partnership with Root Capital to improve financial literacy and management skills among world based businesses in Latin America and Africa from which many of our coffees are supplied. Along with outstanding coffees, innovative brewing technology and a multiple channel approach, our highly engaged employees and productive working relationships throughout our supply chain are part of our success, all supporting our business plan and our commitment to making positive difference in the world.

In summary, despite a challenging national economy, GCMR had outstanding results in the first quarter of our fiscal year, as Fran will detail. Looking forward, we are focused on continuing to deliver strong sales and EPS growth to ensure long-term sustainability and shareholder value. Due to the strong performance this past quarter, for 2009 we are raising our previous top and bottom line estimates, and now expect to grow net sales by 43% to 48% and to increase our net income and EPS within a range of a $1.25 to a $1.35 per share. I am most pleased with our first quarter results and especially excited with our strong holiday sales of our proprietary Keurig Single-Cup Brewing System. With the strength of our employees and the enthusiastic support of our customers, GMCR continues to win business and gain brand awareness throughout our multiple channels in expanding geography.

Now, I would like to turn the call back over to Fran.

Frances G. Rathke

Thanks, Larry. I feel very pleased with our financial performance this quarter. In the interest of time, I will repeat very little of the information contained in the press release, we issued earlier this afternoon, which is available on our website. I do however want to expand upon several key items in that release. As Larry noted, net sales for our first quarter totaled a $197 million, up 56% over last year. Keurig segment net sales were up 89% and Green Mountain Coffee segment net sales were up 36%. Please look at slide three through five for these and more financial highlights.

In addition to strong volume growth, each business unit’s net sales benefited from a price increase. Factoring in both segments pricing changes helped increase consolidated net sales in the first quarter by about 7% over the prior year quarter. Looking more closely at Keurig, about half of the increase in Keurig sales this past quarter was due to the 121% increase in brewer sales driven by at home retail sales.

As noted in our prior quarter, our away-from-home business is still growing but at a slower rate due to the downturn in the economy. Fortunately, in this tough economy the robust increase in at-home brewer sales and strong K-Cup demand more than offset the slower growth in the away-from-home channel. Once again our strategy of multi-channel diversity is serving us well in a challenging economic cycle. The other half of the increase in net sales came from higher K-Cup sales to retailers and from Keurig.com and the increase in royalty income from the sale of K-Cups.

The decline in gross margin was partially offset by leverage in SG&A as detailed in the press release. Keep in mind that seasonality is increasingly a factor for GMCR with our rapidly growing Keurig at home business. Looking forward during the holiday season, our fiscal first quarter such as the one we are reporting today, you will see higher advertising and marketing expenditures than in our other quarters. You can also expect to see higher brewer sales as a percentage of the total than in other quarters.

These factors all impact our gross margins and operating expenses resulting in lower operating margins in the fiscal first quarter than we anticipate in other quarters. Our operating income of $25 million this past quarter included a nice windfall with the patent litigation settlement payment of $70 million from Kraft. The company's tax rate was 38.9% as compared to 40% in the prior year quarter. The difference primarily was due to higher research and development tax credit.

Net income per diluted share excluding the $0.40 per share from the patent litigation settlement was $0.16 in the first quarter of 2009, as compared to $0.12 in the first quarter of 2008 and was above our previous estimates of $0.10 to $0.14 per share. Inventories decreased as planned, this quarter, by 22% to $66.8 million from $85.3 million from the prior quarter and our accounts receivable balance increased by 28% due to the strong holiday sales. During our first quarter of 2009, we strengthened our balance sheet by paying down $50 million of outstanding debt under our credit facility upon the receipt of settlement money from the Kraft patent litigation. We also paid down an additional $18.5 million to to end the quarter at $90 million in outstanding debt.

Looking forward please keep in mind that my remarks, and the information contained in the press release and today’s slides are based on current expectations and our belief that we can achieve such growth despite what we expect will be a difficult economic environment for some time to come. They are therefore not without some very real risk and uncertainty. As Larry has already noted, we are raising our estimates for both sales and earnings growth for this fiscal year. This increase is based upon the vitality of the Keurig and Green Mountain brand, the sales growth we achieved this past holiday season and the higher installed base of Keurig Brewers underlying that growth. For full year fiscal 2009, we now expect total consolidated net sales growth of 43% to 48%.

We also anticipate the total K-Cup portion pack shift system wide by all Keurig licensed roasters will increase in the range of 53% to 63% up from prior estimates of 50% to 60%. As the company gains more data and insight into the K-Cup consumption rate of the new Mini brewer over the next few months, we will refine the range of growth for total K-Cup portion packs shift system wide. We expect to achieve a consolidated operating margin in the range of 8.5% to 9.1% including $4.8 million or a $0.11 per diluted share for non-cash amortization expenses related to the identifiable intangibles and excluding the pre-tax $17 million Kraft patent litigation settlement.

We anticipate fully diluted GAAP earnings per share in the range of a $1.65 to a $1.75 per share as detailed in our press release. Excluding the Kraft litigation settlement, we expect fully diluted non-GAAP EPS in the range of a $1.25 to a $1.35 per share up from prior estimates of a $1.20 to a $1.30 per share. The details of our second quarter expectations, and other factors are contained in today's press release. As previously announced on September 15, 2008, the company executed an Asset Purchase Agreement to acquire the Tully’s coffee brand and wholesale business from Tully’s Coffee Corporation for a cash purchase price of $40.3 million subject to adjustment at closing.

The company will finance this cash purchase through its existing $225 million senior revolving credit facility, and has received the required bank consent. This transaction is expected to close in March or April. We anticipate the acquisition will be neutral to modestly accretive to our earnings for the first 12 months of ownership following the closing of the transaction, and accretive thereafter.

And now I will turn the call over to Michelle Stacy.

Michelle V. Stacy

Thanks, Fran, and good afternoon everyone. Keurig delivered outstanding year-over-year brewer sales growth, and we believe our strong growth in brewer placements will drive continued growth in K-Cup volumes. During the recent holiday season, we sold 711,000 brewers, up a 121% over last year. We outperformed retailer estimates as well as our own. Our supply chain was prime to support this level of success, and while some retailers experienced temporary out of stocks, we were able to ensure that our retail partners could meet holiday consumer demand in most cases.

A summary of the total brewers shipped by Keurig during the quarter together with the total system wide K-Cup shipments by our licensed grocers is presented in a table on the last page of today's press release. Our strong Q1 success was driven in particular by four factors. The first factor is a tremendous consumer appeal of the innovative Keurig Single-Cup system combined with the appeal of our outstanding coffee offerings. The Keurig system is positioned for these economic times at an excellent price value relationship, and is doing well in large part simply because consumers love it, as evidenced by our continued very high customer satisfaction rating.

The second factor significantly boosting our exceptional demand with our 2008 holiday season, National TV advertising spend of $6.6 million. Our sales saw an immediate lift with the start of advertising in early November. The third factor was our increasing retailer support evidenced this holiday season. We experienced a significant increase in major retailer advertising and merchandising along with in-store demos.

Finally, the launch of the new Mini Brewer in September at a price point of 79.95 made the Keurig single serve system more accessible. Importantly, sales of the Mini does not appear to negatively affect sales of our other Keurig retail brewers, which grew in our key retailers at rates approaching 90%. Our away-from-home business growth slowed in the latest quarter versus our expectations due to the downturn in the economy. However, we are optimistic about our ability to continue to increase the installed base of away-from-home brewers particularly through geographic expansions and penetrations into the large small-office market.

Keurig's success speaks for itself. Our November QVC program sold a record 90,000 brewers in 24 hours. In the fourth calendar quarter of 2008, the NPD data for total coffee makers shows Keurig tied for the number two position in dollars with a 20% share. In December, Keurig had the top three selling brewers in dollars. Our special edition brewer is the number one selling coffee maker in dollar sales and the Elite and Mini were the number two and three brewers.

For the calendar quarter, all four Keurig Brewers were in the top 10 coffee makers with three Brewers in the top five. Importantly, Keurig is growing the single serve segment of coffee. According to NPD, in the fourth calendar quarter of 2008, this segment grew to 25% dollar share of total coffee makers, and was up 44% versus fourth quarter calendar 2007, while total coffee makers was down 3%. Keurig fueled single serve growth and achieved an 82% dollar share of single serve, up 24 points from a year ago.

Keurig was the only coffee maker to achieve significant sales growth this past quarter both in share and actual dollars. In three years, we've gone from a small player in the single serve segment to the large player in the single serve segment, to the leader or a leader in the overall coffee maker market. We believe the evolution has become a revolution. You can see slide 12 for NPD growth trends data.

Our Q1 results indicate that Keurig Brewers were one of the few hot items during this retail season. While our growth numbers benefited from an increase in retail store count from 10,000 a year ago to approximately 14,000 stores by the end of our fiscal first quarter. Most of our brewer sales growth came from increasing rate of brewer unit sales per store. Looking forward, the consumers demand for Keurig Brewers has remained strong into the New Year. We are also beginning to see an increase in the number of brewer SKUs being carried by retailers, and rapid expansion of K-Cup distribution at both retail and grocery.

In summary, we had an outstanding holiday season on brewer sales, which should drive K-Cup sales in the upcoming quarters. We have achieved a significant share in total coffee makers and are the pre-eminent leader in single serve. In a difficult economy, the Keurig single serve system offers consumers a better value by brewing a great cup of coffee at home easily and conveniently. And now I would like to turn the call over to Scott McCreary.

R. Scott McCreary

Thanks Michelle. Keurig success and the synergy between the two businesses really make this a winning combination and continue to drive growth for the Green Mountain Coffee segment. We grew net sales this past quarter by 36% with strong K-Cup shipments across multiple channels. The launch of the 12-Count K-Cup package for supermarkets has helped us expand over 2600 locations with almost all stores also selling the Keurig Classic Brewer. This helps present the Keurig system to consumers and adds incremental K-Cup demand by selling brewers in the coffee item.

Key customers additions in Q1 include Stop & Shop, Giant, Meyer in the Great Lakes region, Lucky's in California and Fred Meyer in the North West, as well as broad acceptance in virtually every northeast and mid-atlantic chain. The latest data from IRI, reports that K-Cups are now the leading single cup coffee format sold in grocery and mass merchant channels. Over the past six months, K-Cup's share of the grocery single cup business has increased by more than 10 percentage points while the pods share has declined by over 10 percentage points. This is particularly impressive when you realize that our grocery distribution represents only about 15% of the nationwide market. We expect our share of single cup coffee to continue to expand as we bring our new supermarket customers and support the rollout with supermarket demonstrations, in-store displays and feature ads.

Our wholesale club business did extremely well in Q1 as same-store sales increased and we expanded distribution of the 80-Count package into New Costco regions. We are now in over a 170 Costco stores and a 170 BJ Stores with plans to add Costco’s in the Midwest and Southeast regions. This provides a complementary K-Cup offering to the brewers that Keurig sells in this channel. Our investment in K-Cup capacity has paid off with our successfully meeting the strong demand in Q1. This was demonstrated by excellent order fulfillment, call center answer rates and overall customer service.

Additionally, we’re delivering productivity gains through continuous process improvement efforts. This is paying off with reduced scrap, reducing our environmental impact and achieving a higher return on the capital we’ve invested in these packaging lines. The new plant in Tennessee now has six production lines bringing us to 22 lines across the company. Knoxville has nearly 40 people on staff and we continue to hire and train new operators as demand grows. We have annual machine capacity of approximately 1.4 billion K-Cups. To further support the increasing demand for K-Cups, we recently authorized the initial investment to construct roasting operations in Knoxville with the goal of having roasting capability in place for next fall.

Our businesses long-term health and success depend on the farmers with whom we work. So, investing in sustainable agriculture and healthy communities makes good business sense, it's also the right thing to do. This past quarter, Fair Trade and organic coffees represented 33% of total coffee pounds sold, up from about 30% in last year's first quarter. Our anticipated acquisition of Tully's Coffee will enable us to accelerate our geographic expansion plans on the west coast. In addition to the supermarket channel, we expect Tully's will deliver incremental growth in the OCS and foodservice segments.

The Tully's brand has a loyal and enthusiastic consumer following and we plan to leverage the combined value of our brands to accelerate our growth, especially in western regions of the country. Over the years, GMCR's multi-channel distribution model has been invaluable in buffering the ups and downs of economic cycles. This benefit has never been more evident than it is today.

Indeed our multi-channel growth strategy combined with our excellent coffee quality superior customer service and our commitment to corporate social responsibility gives Green Mountain Coffee a distinct competitive advantage that is delivering to both coffee lovers, and our stockholders in the marketplace. And now I will turn the call back over to Larry.

Larry Blanford

Thanks, Scott. Fran, Michelle, Scott and I are joined today by John Whoriskey, General Manager of Keurig At Home division and Dave Manly, Vice President of Marketing Keurig Direct and Away from Home. From Green Mountain Coffee business unit, we have T.J. Whalen, Vice President of Marketing, Jim Travis, Vice President of Sales and Jon Wettstein, Vice President of Supply Chain Operations.

We will now start the question queue.

Question-and-Answer Session

Operator

(Operator Instructions). We will go first to Scott Van Winkle with Canaccord Adams.

Scott Van Winkle - Canaccord Adams

Hi, congratulations on a great quarter.

Larry Blanford

Thanks Scott.

Michelle Stacy

Thank you Scott.

Scott Van Winkle - Canaccord Adams

Did I hear you say that brewer sales seem to be strong thus far in the New Year, I assume that met the calendar year?

Michelle Stacy

Yes our initial results from January based on point-of-sale data shows that our rate of sale growth is equal to what we have been doing in the past, so we are having a very good January so far.

Scott Van Winkle - Canaccord Adams

Excellent. So, you ever had any issue with retailer's kind of destocking inventory, we hear a lot about retailers focusing on cash flow coming out of the holidays?

John Whoriskey

Hi, Scott. This is John Whoriskey. No, we're not and seeing any of that happening and we are actually replenishing inventories in preparation for lots of advertising and merchandising programs going forward for the next several months.

Scott Van Winkle - Canaccord Adams

Great. And it looks like, if I did the math right, you talked about 90% growth of brewers excluding the Mini, that you sold about a 100,000 Mini's in the holiday quarter, do you expect any difference in the number of K-Cups sold per Mini than you do for a typical brewer?

Larry Blanford

Yeah, Scott this is Larry Blanford. The 90% refers to key retailers, so you can't quite triangulate that numbers as you're suggesting, but nevertheless the Keurig Mini did exceed our expectations and that of our key retail customers. With respect to the K-Cup usage for the Mini, we have factored that into our model at a fraction of our normal consumer brewer, because remember we had positioned the Mini as a supplementary brewer for home-office or maybe office cubical et cetera. We are not really sure, in all honesty what that attachment rate for the Keurig Mini will be, we have just fielded a survey of some 3000 consumers, who bought the Mini in the holiday quarter. And in a few weeks, we should have a much better understanding of how they are using that product, where they are using it and what their K-Cup usage is per brewer, per day. And I think as Fran mentioned in her comments, as we get that data we will refine our K-Cup estimates for the year going forward.

Scott Van Winkle - Canaccord Adams

Great. And, if I look at the market share data, I hate of keep harping on Keurig, but I think everybody wants to, but if I look at the market share data both in dollars of unit versus you and the rest of the single-cup category I think 81%. You weren't anywhere close to 81% of the shelf space, I mean there is still a lot more single-cup brewers out there, apparently turning slower than your product. Have you seen any change or, if you it like, I don’t know if you are like a category captain for single-cup brewing, but when you go into 2009, as a percent the shelf space, I would assume with the market share.

John Whoriskey

Yes. Hi Scott, it’s John Whoriskey. While two things that I would point out is, more importantly beyond the share that we have in single serve is our share of total coffee makers now for this quarter, and when Michelle was commenting on that, I think you heard two things. One is that we are 20% of the dollar share of all coffee makers in the quarter, and we are 9% of the unit volume. And I think most of you know, roughly 20 million coffee makers are sold every year. So, it gives you some perspective about how important we have become as a brand in total coffee. With that comes our planning and evaluating our product line and looking to broaden our assortment as we go forward and there are a number of changes that we are going to be making and additions to our product line to realign that and take advantage of that because we deserve more shelf space for single serve, because single serve is becoming more and more important every quarter.

Scott Van Winkle - Canaccord Adams

All right. And just a couple more, if you could kind of talk about Canada, I do not think I have heard any specific about Canada, but I think this was your first holiday in that market. And then second, what percentage of the supermarket accounts where you have K-Cups are now selling the brewer or taking the brewer, I didn't see many in the holidays outside of I think Stop & Shop?

John Whoriskey

Right. Hi Scott, it's John again. I'd just comment on Canada, first we have really just begun our development of the Canadian market, we are roughly in about a 1000 stores up there, our go-to-market strategy will probably merit very much what we have done here in the United States and the acceptance so far has been very, very good, we are – we are off to a very good start, and so I think we can look for continued growth that is comparable to what we are seeing in the United States.

Jim Travis

Hi Scott this is Jim Travis following up on your second question relative to brewers at grocery. We are now, as Scott mentioned, in about 2600 stores naturally a combination of K-Cups and Brewers. I would say about half to a little more than half, half of the brewers which is a great complement to having the K-Cups in the grocery stores when the consumer sees the brewers and the K-Cups together, it really is the message we want to make sure that they are understanding that they go together. We continue to work on getting the brewer placed as a regular item. We’ve had some key success as you mentioned Stop & Shop. That is now a regular item at Stop & Shop over the holidays it was an In-N-Out. So, they’ve now recognize that as a regular item so that is a bit of a good news for us. We like that, and the fact it is going to be on the coffee are permanently is also great for consumers that are going to be getting acquainted with the brand.

Scott Van Winkle - Canaccord Adams

I’m sorry one last question if I have to ask that, the world’s largest retailers got this big program pushing coffee consumption at home and you’re 9% of all brewers sold, is Wal-Mart in the future?

Michelle Stacy

This is Michelle Stacy. We would, clearly as we are looking forward, we are looking at all of the opportunities to put our brewer in front of consumers in the right locations and this is clearly one of our considerations, however, we are not going to disclose any future plans at this time.

Scott Van Winkle - Canaccord Adams

Thank you very much.

Michelle Stacy

Thanks Scott.

Operator

We will move next to Alton Stump with Longbow Research.

Alton Stump – Longbow Research

Thank you. Good afternoon.

Larry Blanford

Hi, Alton.

Michelle Stacy

Hi, Alton.

Alton Stump – Longbow Research

Great job on the quarter obviously during a very weak overall spending environment in the holidays. I guess just going forward, you have talked quite a bit about a few of your growth ideas within the grocery channels though, I just want to get an idea of; as you have gained penetration there, how big of a deal you think that could be over the next 12 plus months, and is that improving the accessibility of K-Cups for a consumer even if that consumer does buy at the actual Brewer at a high-end location?

T.J. Whalen

Hi, Alton this is T.J. Whalen thanks for your question.

Alton Stump – Longbow Research

Sure.

T.J. Whalen

We are excited about grocery distribution for a couple of reasons one because of the research that we have done with consumers understanding that accessibility of K-Cups has previously been a barrier to purchase for some on the system. So, simply making consumers aware that they can get K-Cups where they traditionally found their every day coffee selection, it’s a very important step for us. Secondarily, we know that the majority of coffee that’s purchased for home consumption comes in grocery stores, so the sales opportunity is material as well. and then thirdly just the opportunity to present Brewers along side of those K-Cups presents a bit of incremental distribution for Brewers in the future as well.

Larry Blanford

Yeah Alton this is Larry Blanford, the other part of your question I think had to do with the rate of expansion, and I think we've provided explicit guidelines on that, but we just started to produce the 12-count four supermarkets in August. We now have converted most of our existing northeast accounts, we obviously have expanded the number of locations, and we continue to do that. We are pacing ourselves in from a couple of perspectives. One, we are certainly thinking about our geographies in terms of brewer densities. We want to make sure that when we take K-Cups into a supermarket that they are going to be successful. The other thing and really a credit to Jim Travis and his team. We are very much attempting to place a system at those supermarket locations. And so typically, we have to deal with both a general merchandising buyer as well as the coffee buyer, and bring them together and get them to work together and it takes a little bit of experience that Jim has to pull that off. So, we are pacing ourselves but overall, we are very excited about the channel. Also one other important point as I think you are aware, the Tully’s acquisition, which as Fran said we expect to close in March or April, a significant part of that acquisition is leveraging their grocery presence with bagged coffee in about 5000 locations. We certainly are excited about bringing K-Cup portion packs to those grocery locations as well.

Alton Stump – Longbow Research

Great. Thank you guys.

Larry Blanford

Thank you, Alton.

Operator

We will hear next from Mitch Pinheiro with Janney Montgomery.

Mitch Pinheiro - Janney Montgomery Scott

Hello there good afternoon.

Larry Blanford

Hey Mitch.

Frances G. Rathke

Hey Mitch.

Mitch Pinheiro - Janney Montgomery Scott

So, staying on the supermarket thing, Jim Travis probably has one of the easiest sales jobs in the country?

Jim Travis

Thank you, Mitch.

Mitch Pinheiro - Janney Montgomery Scott

Yeah. I know, but so I mean, you have got 80%, the NPD data showing the share in the 20% of all coffee brewers and, the pod share going down in supermarket, besides pacing yourself and I understand that, and I know it takes a while to get things through grocery, but I can't see, I mean would you expect to see, maybe like a 40 or 50 ACV this time next year? I mean how can they take the Keurig, the K-Cups?

Jim Travis

Mitch this is Jim. I appreciate the opportunity to set my goals right here, that is much appreciated. No it sounds a great question actually and, you can imagine, when we talk a lot about next targets and how we do that, in addition to the pacing that Larry mentioned for geographic reasons, making sure that we have got the right brewer penetration numbers in these geographies, is the fact that we are also working around reset timing as well as presentation timing for national customers that review categories at certain times of the year. So, there is a bit of a finesse game going on in terms of when we can actually make those presentations, and we’re excited about that and we’re going to keep going there.

Mitch Pinheiro - Janney Montgomery Scott

Is March the typical reset date for the coffee category or the spring I mean?

Jim Travis

Well, we would expect to be making presentations around the March, April time the resets were actually later in the summer.

Mitch Pinheiro - Janney Montgomery Scott

Okay.

Jim Travis

And typically the cut off is around Labor Day so most customers you would see having Labor Day as kind of the hard cut off for anything changing in the stores.

Mitch Pinheiro - Janney Montgomery Scott

Okay. And staying with the supermarkets so I bought the new 12-count in the Acme supermarket chain, and of course they were on the very lowest shelf, you had eight SKUs there but in a lower shelf I kick, I ran into them by kicking them, but the I paid $8 for 12-count which is so $0.75 or so for a K-Cup about a 50% premium that what I could buy for on your website, and obviously with one-tenth, one-fifteenth of the selection, is there any, I know it helped you get the awareness out there. I know people are accustomed buying a coffee in the grocery, but did the pricing difference, is it catches me a little off guard here. How do you think about that and how is that presented to the retailing partner?

Larry Blanford

Mitch, this is Larry. Just to respond to your question, that particular price you ran into is probably a little higher than what we would typically find in grocery. I think we are just a little over $7 for a 12-count on average basis IRI data.

Mitch Pinheiro - Janney Montgomery Scott

Okay.

Larry Blanford

On groceries which is used for carrying the product. But our fundamental strategy on distribution is to make the K-Cup portion packs readily available to consumers. This supports a kind of mass-market strategy that we have for single-cup brewing, we want to obviously drive as many brewers out there as we can and make those K-Cup portion packs easily available to consumers. We do view now the 12-count in grocery has really been a convenience purchase for the consumer so that when they are running low or they are in the store they need to pick up an extra variety or need a few more to get through a week end or whatever they those are available. As T.J. mentioned, at least with respect to some consumers about the lack of availability in grocery has been a key reason they have hesitated to buy the brewers, and as we get it out there we take that reason away. So, I think it's working right now and we are going to have to move them from the lower shelf in ACME up to the eye level, I think we have got better placement in other locations, but at least around there, which I think you said eight SKUs and that is.

Mitch Pinheiro - Janney Montgomery Scott

Yeah.

Larry Blanford

Significant.

Mitch Pinheiro - Janney Montgomery Scott

Okay. So, changing subjects a bit, so, you sold 711,000 brewers and most of those brewers came with 18 free K-Cups if not more, so there was almost 13 million, there is 13 million sort of starter kit, K-Cups out there, how should we think about how that flows through like, in terms of the K-Cup sales in this current quarter, in the upcoming quarter we are in now. Should we see a dip, I mean will that happen or how do we think about that? And I am sure they were more than 13 million, because Costco ran deals and QVC ran deals et cetera?

Larry Blanford

Yeah, Mitch. An excellent question, we do attempt in our modelling to build in the kind of the latency from purchase to use to first use to when consumers would actually be repurchasing K-Cups. So, what you will see is that our K-Cup demand will build in January, February, will actually peak at least given previous years and given our own modelling, actually in the month of March. So, John and Scott and the Green Mountain team have done a great job of customer service so far, they are running full out, and preparing for what we anticipate to be a great quarter here in terms of K-Cup demand and particularly the month of March, if that is any help to you.

Mitch Pinheiro - Janney Montgomery Scott

Well so, have you seen any little dip in reorder rates or purchases of the K-Cups?

Larry Blanford

No, they are on their way up, my only point is they will peak in March.

Mitch Pinheiro - Janney Montgomery Scott

But I guess I have been so right after, following right here in January the reorder rates on, and you’re seeing the same type of velocity if not more?

Larry Blanford

Mitchelle would you add please?

Mitch Pinheiro - Janney Montgomery Scott

Yeah.

Michelle Stacy

Mitch this is Michelle Stacy. We have seen that the K-Cup growth has started immediately. One of the first things that happens is when a consumer purchases a brewer even as they get, they are frequently buying a K-Cup package at that time so they are already – we’re already getting that benefit, in addition while they are walking out with quite an assortment in that box, that box doesn’t also contains things that they may not quite as quickly want to use on a daily basis. So we find that they do go back to retail fairly quickly to pick up their favorite brand of coffee whether that is an extra bold or a Nantucket blend or if they want to get more teas. So, we’re finding that they are coming back into the market fairly quickly, and what we are really saying is we are already seeing that growth now as I said earlier, our year-on-year growth rates are equal to what we've seen in the past. So, we are continuing our year-on-year growth rates that includes our growth rates for K-Cup, but we do expect to peak it in March.

Mitch Pinheiro - Janney Montgomery Scott

Okay great.

John Whoriskey

Hey, Mitch can I just comment, this is John Whoriskey? I just wanted to add as you were talking about grocery and we are talking about K-Cup sales, we shouldn’t forget that there are 14000 retailers that carry a very wide selection of K-Cups, some more than others which is a very significant channel for us selling K-Cups and having them available, and having access for the consumer as well to the point where, Mitchell too, when the customers are buying a brewer in a retailer for a gift or whatever happens to be they are going to be taking up a few boxes of coffee along with that as well. So, that’s a very important channel for us right now and that will continue to be even as we expand the grocery business.

Mitch Pinheiro - Janney Montgomery Scott

Okay, thank you. And then as far as I noticed in the receivables line, I noticed that reserves were up in the quarter. Fran, is there anything there in particular just cautionary or how should we be looking at these receivables?

Frances G. Rathke

Hi, Mitch. In terms of receivables, as we noted, they are up over the last quarter end due to the growth of the business at holidays and the reserve really is, they're consistent with our prior quarters in terms of the methodology we have not seen any deterioration in our aging and in terms of risk about the retailers and any issues with collections from them, we have actually received, just this week a sizable amount came in at over $22 million from the retail area. So, it is not at all related to any specific risk, to any one customer, but rather more just a normal percentage of our receivables.

Mitch Pinheiro - Janney Montgomery Scott

Okay. And then Tully's, I thought it was going to close in December sometime, what was the reason for the delay or what has been so far the reason for the delay?

Frances G. Rathke

Sure, Mitch. This is Fran again. The reason is primarily, it took longer than we all anticipated to get the proxy out the door and filed. And then what happened is the SEC decided to review it, so it's just taking a while to go through the whole comment process with the SEC, but I think it's going to be all wrapped up with the SEC shortly. Then it has to be printed and sent out to the shareholders, probably give them 30 days to wrap that up and that is why we are saying now March, but it really was primarily related to a delay in getting the proxy out the door.

Mitch Pinheiro – Janney Montgomery Scott

And I guess suppose there hasn't been any material change in their business?

Frances G. Rathke

Not at this time, we do, keep the current review within as Scott noted on his remarks we’re out there doing a lot of work trying to ensure we are ready to go from an integration standpoint, and we also monitor their monthly financials and have not seen any material or adverse change.

Mitch Pinheiro – Janney Montgomery Scott

Okay. Thank you very much guys.

Larry Blanford

Thanks Mitch.

Operator

(Operator Instructions). We will go next to Mark Astrachan with Stifel Nicolaus.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Hi, good afternoon everybody.

Larry Blanford

Hi, Mark.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

I guess, just first question on the Mini, I was just curious, I know you had talked about it a little bit on an earlier question, that it wasn't quite the full difference between these the 90% growth, but it seems like there was a lot of Mini's nonetheless in the quarter, so I’m curious as to why there were so many versus what you had said, I guess in the September quarter where you were saying you’re basically going to take things slower first with the Mini?

John Whoriskey

All right. Hi, Mark this is John Whoriskey. Let me comment. I would say, it performed better than we had expected, but I’d just go back to -- the actual results in the marketplace would put our special addition model as the number one coffee maker in dollars terms at retail for the period. And also our Elite brewer was at number two and the Mini did, did very well, but I would say it was third in line of our performance there and was not the key driver in our business.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Okay. And then shifting gears to the SG&A side of things. You had a pick up in the selling, for the advertising expenses in the quarter, but SG&A as a percentage of sales and particularly G&A as a percentage of sales was down substantially, and by itself and G&A was down on an absolute basis year-on-year. I am just trying to figure out what's going on here and why the tremendous amount of leverage?

Frances G. Rathke

Hi, Mark this is Fran. As you noted, we essentially have the same dollar amount of G&A this year Q1 of '09 as we did at Q1 '08. And essentially it is due to, at this point having a similar infrastructure, and we did not increase our cost in the G&A side and through cost management and really pay attention to that. As we noted, we did plan on increasing the selling and operating side with the major investment in the national TV. So, with that we really have focused in both segments on cost management and trying to essentially leverage what we’ve got here.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

So, in terms of thinking about G&A going forward. How should we think about it? Is it more reasonable to compare to what we saw in the balance of 2008 or versus what we saw in the first quarter of 2009?

Frances G. Rathke

Mark, this is Fran again. Specifically the G&A side, I think what we will be doing is increasing it slightly this year, but nothing dramatic, nowhere near to what we would see in terms of the rate of sales growth. So, I think in terms of the year, as, we don’t give out detailed projections by line item, but I think we don’t anticipate any significant increase in the G&A side.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Okay. And then in terms of your thinking about how you view the world from both a brewer standpoint and a K-Cup standpoint thinking about the growth going forward. Is it fair, it seems implicit in what you're saying that the K-Cup growth year-on-year in the March quarter, and I guess frankly even the June quarter should in fact be higher than what we are seeing for brewer sales in those quarters, did that make sense?

Larry Blanford

Mark, this is Larry. Not necessarily. We have provided with our guidance, a range of K-Cup growth, the brewer sales in any given quarter can have a fair degree of volatility to it, remember we are talking about, when we talk about brewer sales, we are talking about what we are selling into retail and in any given quarter, we may be phasing out older models, phasing in newer models, opening up new distribution and selling in that distribution. There is a lot going on, on the brewer side, which causes brewers to be more volatile quarter-to-quarter. On K-Cups, we can provide pretty good projections because we are building that installed base of brewers and those brewers that are installed just keep driving the consumption of K-Cups, and we can project that pretty well. So, we are not providing projections going forward on brewer growth for the year or by quarter. So, I don't know if you can necessarily assume that.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Got it, okay. And then shifting gears, Costco, you had mentioned some data there in terms of the number of stores you were in, could you just mention that again in terms of stores in the December quarter and then also were you in Costco stores last December?

Jim Travis

Sure. Hi Mark. It's Jim Travis, as Scott mentioned we are in a 170 stores. Trying to recall what we were in last year, I believe it was around, around 80 may be, I would have to check that for you, but right now we are in a 170 stores with K-Cups and with the brewers, it's even higher than that, I will let John comment on that.

John Whoriskey

Yes, we are in all the Costco stores in the U.S. with our brewer program.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Got it. And versus last year?

John Whoriskey

We were probably, I would say, in about 85% of those doors a year ago.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Got it, okay. And then just finally in terms of thinking about this delta between the brewer sales and the K-Cup sales, I guess just given the amount of brewer sales that you had in the quarter I would have expected the K-Cup sales to be up a little bit more or at least inline with the year-on-year growth we saw in the fourth quarter last year. I guess the question is one, how should we think about this going forward and then sort of related to that, if you sit there and you look at the amount of inventory of K-Cup sitting in the system, how do you generally get an idea of what’s out there versus what the sell-through is?

Larry Blanford

Mark, this is Larry Blanford, I will tackle the first question. With respect to brewer growth rates and K-Cup growth rates, recall that what we have going on is very, very strong growth of the at-home brewer, which we have indicated, usage rates at least for our standard brewers, have been in the 2 to 2.5 K-Cups per brewer per day range.,And further, as we indicated I think in the last conference call last year for the first time, the amount of K-Cups that were generated -- the demand for K-Cups being generated by at home brewers crossed over the demand that had been generated by our away-from-home brewers, and of course our away-from-home brewers on a per brewer basis generate more K-Cups per day. So, it stands to reason that at least right now, you will as the demand overall for K-Cups is being increasingly driven by at-home brewers that you need a higher percentage of brewer sales to drive your K-Cup growth rates, because you’re averaging the 2 to 2.5 per brewer usage rate with a higher usage rate on the away-from-home units. So, it’s pretty much math, and so you would expect to have a higher brewer growth rates, since most, a good portion of those brewers are coming from the at-home part of the business. So, I think that may help give some insight as to why those numbers are working as they are. And your second question, somebody want to tackle that?

Yeah, could you repeat the second part of that, Mark?

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Sure, and it’s basically just thinking about the inventory of the K-Cups out there, versus what’s being taken away at retail?

Michelle V. Stacy

This is Michelle. One of the advantages that we have is we are able to read K-Cup POS on a weekly basis from our major retailers. So, we have a very good idea of how the K-Cups are moving week-to-week in the major retailers that we read and that allows us to understand how it's matching up to our model, and to begin to plan our forward inventory build.

Larry Blanford

Yeah. And Mark just want to quick point on K-Cups, certainly we are selling coffee and we do not at the manufacturing level store any significant quantities in terms of weeks of supply, we want to deliver coffee as fresh as we can to the ultimate end user. So, at the manufacturing level, we actually have very limited inventories, we will have, a week, if you look at K-Cups, we will have a week, week and half of inventories and that’s all we have in the system at the manufacturing level, certainly there will be additional K-Cups at distributors and/or in-store, but the inventory chain is pretty tight actually.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Okay.

R. Scott McCreary

And just to build on that. This is Scott McCreary. We think that each of our customers are trying to manage their inventories very tight and as Larry said, we have one to two weeks maximum inventory of K-Cups here, but our OCS distributors are on that same order of two to three weeks of inventory and supermarkets are trying to maintain in that same range. So, it is moving through the system fairly quickly and there isn't a big bulge of inventory hanging out there.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

That’s helpful. And just finally in terms of thinking about some of the promotions like some of the mail-in rebates that we saw in the December quarter. How do you account for that in the P&L?

John Whoriskey

On the promotions? Hi, this is John Whoriskey, that is a marketing expense when we run a sponsored events like a gift with purchase program that would be part of our marketing expense and I would say that, compared to what we did a year ago, we are virtually comparable with the types of promotional programs we were in and were more like gift with purchase programs and things like that.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Got it. And in terms of what the mail-in rebates for the K-Cups. You would recognize those when you give those out to the consumer or when they’re sold from a brewer standpoint. And how do you recognize to sell the K-Cups.

Frances G. Rathke

Mark this is Fran. In terms of the accounting for that rebate, when we, John, when he put his plans together, tells us from a finance standpoint what was running in terms of a rebate and we would have that in our, either a co-op advertising accrual or right typically in the selling and operating line. Once in a while if we have something that’s flowing through directly price of to the retail, that would flow through net sales, but typically a rebate activity would be in the selling and operating line.

John Whoriskey

Right and Mark we should add to that. Our pricing at retail for brewer products, we run what we called minimum advertised pricing policy. So, pretty consistently across all of our retail channels and with all of our retail partners, we are not discounting advertising pricing policies on our coffee makers as well as the retail products that we have for our K-Cups and accessories and so on.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

And in terms of just recognizing the actual shipment of that K-Cup, is it in January after they send a mail-in rebate or is it recognized as the shipment of K-Cups at the time that they purchased the brewer.

Frances G. Rathke

Mark this is Fran again. When we get data as to when is the rebate essentially or a program running, that is when it is booked in the current quarter.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Got it. You just made an assumption. Okay.

Frances G. Rathke

Exactly, we make an estimate as to what would be the redemptions in expense.

Mark Astrachan – Stifel Nicolaus & Company, Inc.

Perfect. Well thanks everyone.

Larry Blanford

Thank you, Mark.

Operator

We will hear next from John Anderson with William Blair.

John Anderson – William Blair

Good afternoon.

Frances G. Rathke

Hey John.

Larry Blanford

Hey John.

John Anderson – William Blair

I will try and keep it brief here, just a couple of questions. With the focus on grocery and the progress you're making there I am just wondering if there is any, what kind of the profit impact might be from selling additional K-Cups through the grocery channel, versus kind of your current non-grocery retail locations, I am thinking, anything here in terms of sliding fees or others that might, create a different kind of margin profile in that business?

Frances G. Rathke

John this is Fran. In terms of rolling out to grocery, we typically have minimal expenses upfront, and as we noted earlier, we have a good track record in terms of showing the grocer that this is the great item to have. So, I would say in terms of sliding fees they are not material overall, and then in terms of our ongoing relationship with the supermarket channel, similar margins to what we see in the other channels.

John Anderson – William Blair

Terrific, thanks. And then….

Frances G. Rathke

It’s for obviously Consumer Direct.

John Anderson – William Blair

Sure, sure understood. I don’t think you broke it out explicitly in the press release, but the K-Cups sold by the GMC segment relative to the system wide number, is it fair to assume that that remained in kind of the historical range of 55% to 58% in the quarter and is that kind of the way to think about it going forward over the next several quarters?

Frances G. Rathke

John, this is Fran again. Yes you are right that is how you should think about it in terms of fiscal '09 overall typically it moves around between the 55 to 58 depending on the quarter. So, that's why we are providing that range to you in the table in the back of our press release.

John Anderson – William Blair

Terrific. Last question, just looking at the revenue, the actual top line growth in the first quarter and the projection or the outlook for the second quarter, it would seem to imply that in the second half of the year, revenue growth would decelerate materially, are you being conservative there – is there something I am missing just thinking about kind of the flow through of the brewer unit sales in the following K-Cup sales?

Frances G. Rathke

John, this is Fran again. In terms of the quarter-over-quarter as we mentioned for the year, we have our range of 53 to the update through 58, the reason, typically in Q3, coffee sales tends to be somewhat seasonally affected and then also Q1 as we just reported tends to be very strong due to the holiday sales of the at-home brewers and then also our Q4 tends to be stronger due to pipeline into the retailers for the at-home holiday season. So, I think for Q2, where we are giving guidance of 48 to 53 versus our fiscal year guidance…

John Anderson – William Blair

43 to 48.

Frances G. Rathke

48 right. We are anticipating a little bit of a slowdown, most, I would say Q3 tends to have a slower growth rate.

John Anderson – William Blair

Okay. Thanks and congratulations on a great quarter.

R. Scott McCreary

Thank you.

Larry Blanford

Thanks John.

John Whoriskey

Thank you.

Operator

We'll hear now from SunTrust's, Bill Chappell.

William Chappell, Jr. - SunTrust Robinson Humphrey

Good afternoon. And I will try to repeat as well. First question, just, I think when you talked in November that the brewers sales were up about a 100%, year-over-year and then end of the quarter up a 120%, which I guess seems to imply that, there was an acceleration throughout the quarter. I guess, is that the case, and was that due to more availability of Minis to the advertising campaign, is there any reason why that accelerated?

John Whoriskey

Hi, this is John Whoriskey. I would say that that’s the factor of – it's Christmas and the seasonal effect of when people are actually going to be in the stores, December really does peak significantly right before the 25th and I think that is really probably the extent of what you are seeing?

William Chappell, Jr. - SunTrust Robinson Humphrey

Yeah. I would just say year-over-year growth seem to accelerate inter-quarter was that the case?

John Whoriskey

Yes, that is the case, and the advertising certainly that we were nationally advertising, national advertising campaign certainly drove the sales in that direction as well.

William Chappell, Jr. - SunTrust Robinson Humphrey

Okay. Do you plan on stepping up advertising again as we move forward or into the off-season?

Michelle V. Stacy

This is Michelle. We will definitely be looking at increasing our advertising program as we move into next year's holiday season and we are right now working with our retailers at increasing our retailer advertising support, merchandising display, and demo activity as we go into the Mother’s Day and Back-to–School timeframe.

William Chappell, Jr. - SunTrust Robinson Humphrey

Okay. And one final question on Tully’s. I understand it's neutral to slightly accretive in the first 12 months, the timing of it has been delayed, does that mean it could be slightly dilutive to EPS in fiscal ‘09?

Frances G. Rathke

This is Fran, Bill. It possible could, but we are working aggressively to ensure that when we do close, that we can move quickly to help grow that business rapidly, especially the K-Cup business.

William Chappell, Jr. - SunTrust Robinson Humphrey

So.

Larry Blanford

Well, certainly our objective is not let that be the case.

William Chappell, Jr. - SunTrust Robinson Humphrey

Okay. That’s great. Congratulations on a great quarter.

Frances G. Rathke

Thanks Bill.

Operator

And we do have time for one more question that would be a follow-up from Mitch Pinheiro.

Mitch Pinheiro - Janney Montgomery Scott

Yeah. I’ll be quick too, the gross margin on the brewer, is basically you sell it at cost, was it breakeven in the quarter, your brewer sales on a gross margin basis?

Frances G. Rathke

Mitch, this is Fran. Overall, when we take all the brewers and look at the margin, it essentially is around breakeven.

Mitch Pinheiro - Janney Montgomery Scott

Okay. I presume that the input cost on the brewers, on a sort of go-forward basis have improved versus where they were last year, is that fair to say or have pricing adjustments not been made yet?

Larry Blanford

Yeah Mitch, this is Larry Blanford. We of course did see a run up in commodity cost last spring on materials that are used in our brewers. We did see some increase in parts come through, but we are managing that very aggressively, we meet with our part suppliers and with our manufacturers, and we have been finding ways to bring some of those costs down as well. So, it's something that we’re working on all the time. In addition to just managing pricing of components and assembled brewers, our engineering team at Keurig is also constantly driving cost reduction opportunities and looking for ways to improve brewer reliability as well as lower the cost of each brewer. So, something that we continue to work at.

Mitch Pinheiro - Janney Montgomery Scott

Okay. New products, I saw the new Keurig frother, should we expect any new products out of the Keurig, in the Keurig family, and if so when would we start to see or hear about that?

John Whoriskey

All right. Hi, Mitch this is John Whoriskey, I'd just comment that we have been testing the frother product on our website and haven’t made final decisions on where our next steps will be, but we are actively developing our accessory line as we expand our brewer business as well as the next accessory business that we think will follow on at very good margins. And we have a number of new product launches that will be coming up that we can't disclose today, but we are certainly working at expanding our presentation at retail across all the different products that we participate in.

Mitch Pinheiro - Janney Montgomery Scott

Okay. So, is that something that is like, an international Housewares Show launch or maybe even later than that to keep it closer to the west?

John Whoriskey

Well, you could hear about something at the show.

Mitch Pinheiro - Janney Montgomery Scott

Okay. All right and last question is, you had 14% pound tea and cocoa growth, if you exclude the Keurig business, how did the rest of the company fair on a pound growth basis?

R. Scott McCreary

Hi Mitch. This is Scott McCreary. Overall the other package types that we have are flat.

Mitch Pinheiro - Janney Montgomery Scott

Okay.

R. Scott McCreary

And while we see some decline in bulk for example, as consumers transition to other package types, we are seeing some nominal increases in other package types, but net-net it's about flat.

Mitch Pinheiro - Janney Montgomery Scott

Okay. Thank you very much.

Frances G. Rathke

Thanks Mitch.

Operator

And that does conclude the question portion of the conference. I will turn everything back to you all for closing comments.

Larry Blanford

This is Larry Blanford. It's been a pleasure to talk to you today from a snowy Vermont, about this past quarter and our plans going forward. Our new annual report will soon be available to our shareholders, it also will be posted on our website, I believe Monday night. We appreciate your interest in the company and we very much thank you for joining us today.

Operator

That does conclude today's conference. Have a pleasant day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Green Mountain Coffee Roasters, Inc. F1Q09 (Qtr End 12/27/08) Earnings Call Transcript
This Transcript
All Transcripts