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Martin Redfield

 
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  • What The Green Mountain Coffee Investor Should Know [View article]
    Based on extrapolating trends that GMCR published with their last earnings call, brewer growth for this quarter will probably be in the 10-20% range. Until they publish sales numbers, any estimate you or I make will be, by definition, based on incomplete data.

    The biggest problem with your article is that you seem to be implying that zero growth in brewer sales would be some sort of a disaster. In fact, zero growth in brewers implies very strong earnings growth.

    Wait, how can this be?

    Well, GMCR sells the brewers roughly at cost, so those sales really don't help the bottom line. The K-Cups, however, are where the money is made. You have to remember, though, that the brewers are DURABLE goods, while the K-Cups are CONSUMABLE goods.

    Based on GMCR's estimate of 11.5M brewers in service in March, there are probably about 14M in service right now. Of these, about 8.5M were sold in the past year. That is a staggering statistic, and critical to understanding why zero brewer sales growth is not a bad thing.

    What would zero brewer growth mean for next year? Well, assume the 2008 brewers all need to be replaced, since GMCR estimates the brewers have a useful life of 5 years. That would be just under 1M brewers, so there would be a net gain of 7.5M new brewers on counters in the US. Which would mean an increase in the installed brewer base of over 50%. That is not a typo - ZERO BREWER SALES GROWTH FOR NEXT YEAR WOULD INCREASE THE INSTALLED BASE OF BREWERS BY OVER 50%!

    Assume that each brewer consumes the same number of K-Cups per day, and you get an increase in the profitable K-Cup sales of 50%. So why doesn't GMCR estimate a 50% growth in earnings next year? They are undoubtedly factoring in pricing pressure from competition, and conservatively assuming they will not prevail in their court cases. And some of the brewers will be second brewers in the same consumer unit, which would have lower attachment rates. If they win their infringement case against Sturm next month, I would expect GMCR to raise their FY13 estimates significantly.

    Oh, and you mis-spelled "wily."
    Sep 5 10:43 PM | 6 Likes Like |Link to Comment
  • What The Green Mountain Coffee Investor Should Know [View article]
    Interesting article, but not particularly useful. With more outlets selling Keurig brewers all the time, the expected market share for BBBY (and all other single vendors) would be expected to drop. No conclusions on overall brewer sales can be drawn from a discussion of a single vendor.
    Sep 5 07:22 PM | 4 Likes Like |Link to Comment
  • Keurig Green Mountain's Keurig 2.0 Has Opportunities And Downside Risk [View article]
    I didn't make any comment, I just want you to back up yours. With 20M or fewer brewers out there, stating "in fact millions use the My K-cup" is not at all obvious. Like ProfitHound, I have a My K-Cup gathering dust somewhere too. Owning and using are two very different things. I am convinced that GMCR sells them just to sway folks to buy into the Keurig system, but once they get used to the convenience, they go with the disposables.
    Mar 26 11:36 PM | 3 Likes Like |Link to Comment
  • Keurig Green Mountain's Keurig 2.0 Has Opportunities And Downside Risk [View article]
    Please cite a source for "millions" of My K-Cup users. Or admit that you just made that statistic up.
    Mar 26 08:16 PM | 3 Likes Like |Link to Comment
  • What The Green Mountain Coffee Investor Should Know [View article]
    Don't get me wrong, as I said in my initial comment, your article is interesting. You just tried to stretch your data too far in terms of drawing conclusions.
    Sep 5 08:52 PM | 3 Likes Like |Link to Comment
  • Green Mountain Coffee Patents: Does The World End In 2012? [View article]
    You are very welcome. I am a scientist by trade, and my group has filed a variety of patents over the years. So I already had some working background in the area before I started digging.
    May 16 11:58 AM | 3 Likes Like |Link to Comment
  • Keurig Green Mountain's Keurig 2.0 Has Opportunities And Downside Risk [View article]
    Kind of hard to reply when you keep having my posts deleted.
    Mar 29 08:28 PM | 2 Likes Like |Link to Comment
  • Keurig Green Mountain's Keurig 2.0 Has Opportunities And Downside Risk [View article]
    Still no citation or link, eh? I guess we have all come to expect that by now. BBBY selling 1M a year sounds pretty amazing. No link for that either I suppose. So much for "verifiable."
    Mar 28 12:15 AM | 2 Likes Like |Link to Comment
  • Green Mountain Deal With Coca-Cola Shows Desperation [View article]
    Always so gloomy, Bill! GMCR's quarter was about as they had guided - no big surprise one way or the other. As I suggested in one of my articles, GMCR is back in the mode of under-promising and over-delivering. They knew they could sandbag their forward guidance and still get a big pop in share price with the Coke deal. Now they are set up to report beats for the next few quarters.

    GMCR's coffee growth has moderated, but they still managed to sell more brewers last quarter than ever before. And (as I predicted in one of my articles) they are closing the K-Cup ecosystem to competitors with their 2.0 machines, which will increase their cartridge market share and improve their pricing power.

    With the Coke deal (which I also predicted in one of my articles), investors realize that GMCR will become a growth stock again, with all the expansion funded by their K-Cup cash cow. Expect the P/E to reflect the growth potential of GMCR doing the same thing to the soda aisle that they have already done to the coffee aisle.
    Feb 6 05:50 PM | 2 Likes Like |Link to Comment
  • What The Green Mountain Coffee Investor Should Know [View article]
    So you think that selling Keurig brewers in thousands of new Starbucks outlets would have no effect on BBBY's share of overall brewer sales? In terms of year over year comparisons, for the record, Keurig brewers were sold at exactly zero Starbucks outlets a year ago.
    Sep 5 07:57 PM | 2 Likes Like |Link to Comment
  • What The Green Mountain Coffee Investor Should Know [View article]
    Oh really, how very interesting. What year over year change in Keurig brewer sales do you see at Starbucks?
    Sep 5 07:40 PM | 2 Likes Like |Link to Comment
  • The K-Cup Cloner's Dilemma [View article]
    Hi John, Last I heard the Sturm trial is set for this October, while the Rogers trial is quite a bit later (next year sometime, I think). Not sure why they didn't get injunctions, that really isn't my area of experience. I am pretty sure that both Sturm and Rogers filed for dismissal though, which wasn't granted either.

    -Marty
    Jul 11 06:33 PM | 2 Likes Like |Link to Comment
  • Green Mountain Coffee Patents: Does The World End In 2012? [View article]
    John, I appreciate your insightful and professional comments, there is not enough polite discourse on these boards, in general. There seem to be sources that can be interpreted both ways, so I suppose in the end, the lawyers may fight it out in court. After all, if lawyers all agreed with each others interpretations, there wouldn't be any need for court cases!

    Cheers,
    -Marty
    May 16 05:12 PM | 2 Likes Like |Link to Comment
  • Green Mountain Deal With Coca-Cola Shows Desperation [View article]
    Wow, Bill, thanks for going and re-reading my articles! But you might want to pay a little closer attention. When I made those predictions in 2013, I said "In this article, I attempt to gather information from a variety of sources to provide some insight into what we might see in the next year or two." Sounds like 2015 to me!

    Here is what I said regarding partners for the carbonation business: "GMCR K-Cups, on the other hand, are pretty much a "Who's Who" of coffee brands, a result of broad-ranging partnerships, license agreements, and acquisitions ... there is more than meets the eye to luring rising star Brian Kelley away from Coca-Cola (KO) to be GMCR's new CEO."

    Finally, you said "Also, you stated that FY 2013 guidance was ultra-conservative, yet they ended up having to reduce it." What utter nonsense. At the time I wrote the article, they expected 15-20% sales growth, and they achieved 16%. They expected non-GAAP annual earnings of $2.64 to $2.74, and they achieved $3.39. They expected free cash flow of $100-150M, and they achieved $603M. From the time I wrote the article, they made or beat their predictions across the board for FY13.

    Don't be so grumpy Bill, or at least check your facts before you lash out!
    Feb 6 07:26 PM | 1 Like Like |Link to Comment
  • Green Mountain: Over $300 Or Under $10? The Next Few Weeks Are Key [View article]
    Very good article Derek, thanks for sharing your research.

    I agree the near-term direction is unclear, and that longer-term the sales/earnings numbers will take share price to the appropriate level. You make an interesting case for the price range, though my personal estimates are a bit more constrained than yours. Short of a broad market collapse, I would be surprised to see GMCR drop below book value, currently above $15 per share.
    Feb 13 10:23 AM | 1 Like Like |Link to Comment
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