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A coffee trade-down in play? With Wal-Mart (WMT) and J.M Smucker (SJM) both reporting strong...

A coffee trade-down in play? With Wal-Mart (WMT) and J.M Smucker (SJM) both reporting strong K-Cup sales during Q3, retail analysts see the opening of the single-serve market playing out as expected. Although it's a sticky wicket trying to convince a Green Mountain Coffee Roasters (GMCR) or Starbucks (SBUX) fan that consumers will flock to Folgers or Sam's Club coffee products, early results are promising. Keep an eye on pricing in the coffee market, with Caribou Coffee (CBOU) and Treehouse Foods (THS) trying to recover from recent K-Cup stumbles.
Comments (12)
  • jdspain
    , contributor
    Comments (17) | Send Message
     
    i go to starbucks because i want their coffee. there are other choices and cheaper ones right next door. why would i buy private label coffee vs starbucks. price doesn't enter the equation.
    16 Nov 2012, 08:00 AM Reply Like
  • Windsun33
    , contributor
    Comments (4254) | Send Message
     
    Maybe because Starbucks coffee is far from the best compared to many private labels?
    16 Nov 2012, 09:00 AM Reply Like
  • HZLIU
    , contributor
    Comments (212) | Send Message
     
    If many private labels are far better than Starbucks, they should demand higher price instead of selling cheap.
    16 Nov 2012, 09:30 AM Reply Like
  • Windsun33
    , contributor
    Comments (4254) | Send Message
     
    Only about 15-20% of the Starbucks price is for the coffee itself.

     

    Read the reviews of "big box" coffees, and many other smaller brands, here http://bit.ly/UuNCBR
    Also see their long list of 94+ rated coffees - While there are several well known brands in there, including GMCR and Caribou, there is not a single Starbucks one to make the cut. http://bit.ly/XMceMY
    16 Nov 2012, 09:55 AM Reply Like
  • HZLIU
    , contributor
    Comments (212) | Send Message
     
    You are right about coffee. Starbucks' K-cup is the most expensive one. How other coffee brand can compete if they are better in quality?
    16 Nov 2012, 01:50 PM Reply Like
  • GDW1
    , contributor
    Comments (50) | Send Message
     
    People like the coffee they like. Trading down from GMCR Extra Bold to Treehouse of some other store brand isn't something I would ever do, and can't imagine others would either. Maybe this is expanding the market a bit, but not at the expense of existing brands.
    16 Nov 2012, 08:04 AM Reply Like
  • intech
    , contributor
    Comments (52) | Send Message
     
    Let's review in 11 days!!!!
    November 27th GMCR year end report!!!!
    16 Nov 2012, 08:07 AM Reply Like
  • Bill Burtchaell
    , contributor
    Comments (403) | Send Message
     
    GMCR is in the loop each time a Folgers K-cup is sold, yes you can purchase them at Sam's Club, or Walmart. These partners with GMCR are retail outlets along with many others, Macy's, Bed Bath and Beyond, Costco; etc.

     

    Your alerts continue to imply that these entities are new competitors since the patents have expired, they are not! They may become competing K-cup suppliers. I would have to ask, why would they? GMCR is up and running with new, great state of the art plants for the manufacture of K-cups, they are promoting the brands of Starbucks, Folgers, Caribou, etc, in addition to thier own in house brands. Why would Smuckers ramp up a K-cup manufactureing facility, when they have a relationship that cost them little or no start up, while providing a quality product for a royalty? how much more per K-cup can they earn after absorbing the expense of start up and distribution channels.

     

    If a price war on the grocery shelves evolves, I'm picking the winner to be GMCR. Green Mountain owns this market with 80% share, does anyone believee that each of these Coffee companies are planning to start a manufacturing operation to compete for market share with GMCR, when they have in place a partnership that is thriving? What am I missing here?
    16 Nov 2012, 08:24 AM Reply Like
  • HZLIU
    , contributor
    Comments (212) | Send Message
     
    The inferior quality of private label were reported everywhere. Give Green Mountain management credit to make Keurig K-cup so popular that Tassimo T-cup is forgotten. Tassimo has better brewing system than K-cup and looks better.

     

    In my local grocery store, all K-cups are selling, including private label. Green Mountain should have lowest cost to manufacture the K-cup. The only way to get K-cup cheap is the quality of coffee. There are always consumers for Walmart, Macy or Bloomingdale. One thing is clear; the K-cup market is growing fast.

     

    I guess the coming Quarter report GMCR will have higher revenue but lower profit margin (sure be cited by short seller later) and guide higher revenue for next quarter. The quality of coffee from Keurig K-cup is quite good if you use certain brand. You can try different type and could find one you like. The one I don’t like about Keurig, including K, V and Rivo is the look, not pretty.
    16 Nov 2012, 09:06 AM Reply Like
  • Runningen
    , contributor
    Comments (49) | Send Message
     
    It's not just the coffee it's how it's roasted, shipped and stored. It's all about freshness and then we develop tastes that are hard to change.
    16 Nov 2012, 10:56 AM Reply Like
  • HZLIU
    , contributor
    Comments (212) | Send Message
     
    There are some very interesting comments from 2Q report of JM Smucker about K-cup; (1) 2Q K-cup sale growth double YOY; (2) Expect 70% growth over fiscal ’12; (3) K-cup in Canada significantly contributed to growth of coffee. In the CC, Mark T. Smucker - President of US Retail Coffee and Director answered the question about private label competition; (1) K-Cup still brings new users into the category; (2) we haven't seen as much broad gains in distribution that would have been anticipated. (3) there is some tiering in the category. We feel confident that being partnered with Green Mountain, we will be able to maintain relative costs and quality advantages.
    16 Nov 2012, 03:48 PM Reply Like
  • markb
    , contributor
    Comments (407) | Send Message
     
    This is not a zero sum game. GMCR/SBUX customers are not going to Sam's for K's, rather value customers are going from old style brewers to single serve for convenience.
    16 Nov 2012, 06:02 PM Reply Like
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