Green Mountain Coffee Roasters, Inc. (together with its subsidiaries, the “Company” or “GMCR, Inc.”) is a leader in the specialty coffee and coffee maker businesses. We sell over 200 whole bean and ground coffee selections, cocoa, teas and coffees in K-Cup® portion packs, Keurig® single-cup brewers and other accessories. In recent years, a significant driver of the Company’s growth has been the sale of K-Cups and Keurig brewing systems. We manage our operations through two business segments, Specialty Coffee business unit (SCBU) formerly referred to as Green Mountain Coffee (GMC), and Keurig business unit (Keurig). See Note 9 of the Consolidated Financial Statements included in this Form 10-K.
SCBU sells whole bean and ground coffee selections, as well as K-Cups in domestic wholesale and retail channels and directly to consumers. In addition, SCBU sells Keurig single-cup brewing systems and other accessories directly to consumers and more recently to supermarkets.
Keurig is a pioneer and leading manufacturer of gourmet single-cup brewing systems and targets its premium patented single-cup brewing systems for consumers at home (AH) and away-from-home (AFH) mainly in North America. Keurig sells its AFH single-cup brewers to distributors for offices and its AH single-cup brewers to select retailers such as department stores and club stores for at-home use. Keurig sells coffee, tea and cocoa in K-Cups produced by a variety of roasters, including SCBU, and related accessories to select retailers such as department stores and club stores and also directly to consumers. Keurig earns royalty income from the sale of K-Cups shipped by its licensed roasters.
Corporate Objective and Philosophy
Our Company’s objective is to be a leader in the coffee business by selling high-quality, premium coffee and innovative coffee brewing systems that consistently provide a superior coffee experience. Essential elements of our philosophy and approach include:
High-Quality Coffee. From tree to cup. We are passionate about roasting great coffees and are committed to ensuring that our customers have an outstanding coffee experience. We buy some of the highest-quality Arabica beans available from the world's coffee-producing regions and use a roasting process designed to optimize each coffee’s individual taste and aroma.
Single-Cup Brewing Patented Technology. Our patented single-cup brewing technology, embodied in a premium quality machine, provides coffee and tea drinkers with the benefits of convenience, variety and great taste. Single-cup systems are designed to provide consumers consistent taste, convenience and speed with no mess or coffee waste. The Keurig gourmet single-cup system is based on three fundamental elements:
•Patented and proprietary K-Cup® portion packs, which contain precisely portioned amounts of gourmet coffees, cocoa and teas in a sealed, low oxygen environment to ensure freshness.
•Specially designed proprietary high-speed packaging lines that manufacture K-Cups at the coffee roasters’ facilities using freshly-roasted and ground coffee (or tea or cocoa).
•Premium quality brewers that precisely control the amount, temperature and pressure of water to provide a cup of coffee, tea or cocoa of a consistent high quality in less than a minute when used with K-Cups.
The Company holds 33 U.S. and 73 international patents covering a range of its portion pack, packaging line and brewing technology innovations, with additional patent applications in process. In 1998, Keurig launched its first single-cup brewers for the AFH channel and partnered with the Company to manufacture and sell Keurig’s patented K-Cups. Since then Keurig has licensed several other coffee roasters to package gourmet coffees and teas into K-Cups, all of whom pay royalties to Keurig based on the number of K-Cups shipped.
Through K-Cups, we offer the industry’s widest selection of gourmet branded coffees and teas in a proprietary single-cup format. Consumers can choose from over a dozen gourmet brands and over 200 varieties of coffees and teas. Brands which are packaged and sold by SCBU include Green Mountain Coffee®, our co-branded Newman’s Own® Organics brands, our licensed Caribou® and Celestial Seasonings™ brands, and as of March 27, 2009, our Tully’s® Coffee brand. Additionally, as of November 13, 2009, the Company acquired the Timothy’s World Coffee® brand and the licensed Emeril’s brand, which will be packaged and sold by the SCBU segment during fiscal 2010. Keurig partners with other North American K-Cup brands that include Diedrich, Gloria Jean’s and Coffee People, Van Houtte, Bigelow and Twinings.
Customer Service and Distribution. The Company seeks to create customers for life. We believe that coffee is a convenience purchase, and we utilize our multi-channel distribution network of wholesale, retail and consumer direct to make our coffee and single-cup Keurig® brewers widely and easily available to both AH and AFH consumers.
Our operations are coordinated from our headquarters in Waterbury, Vermont and supplemented by regional distribution centers located in Maine, Upstate New York, Massachusetts, Connecticut and Tennessee. Distribution facilities are designed to be located within a two-hour radius of most customers to expedite delivery. In recent years, we have added a packaging and warehousing facility in Essex, Vermont, purchased our manufacturing facility in Knoxville, Tennessee, and expanded our manufacturing and distribution facilities to Seattle, Washington. As part of the Timothy’s acquisition on November 13, 2009, we have added a manufacturing facility in Toronto, Canada.
Socially Responsible Business Practices. We have a long history of supporting social and environmental causes, allocating at least 5% of our pretax income towards such projects. These projects typically involve direct or indirect financial support, donations of products or equipment, and employee volunteer efforts.
Corporate Culture. Our Code of Ethics is an important part of our culture and is applicable to all of our employees and our Board of Directors. The Code of Ethics is posted on our website. In addition, we believe the Company has a highly inclusive and collaborative work environment that encourages employees' individual growth and personal awareness through a culture of personal accountability and continuous learning.
The Company offers high-quality Arabica bean coffee including single-origin, Fair Trade Certified™, organic, flavored, limited edition and proprietary blends sold under the Green Mountain Coffee®, Tully’s® Coffee, Newman’s Own® Organics and, since November 13, 2009, the Timothy’s World Coffee® brands. We carefully select our coffee beans and appropriately roast the coffees to optimize their taste and flavor differences. Our coffee comes in a variety of package types including whole bean, fractional packages (for food service and office environments), and single-cup Keurig K-Cup® portion packs. In addition to coffee, we also sell cocoa and teas in K-Cups. The Company has an exclusive licensing agreement with Celestial Seasonings to produce Celestial Seasonings™ branded teas and Perfect Iced Tea in K-Cups.
In fiscal 2009, approximately 30% of SCBU’s total consolidated sales volume was from Fair Trade Certified coffee.
We are a leader in selling patented and proprietary single-cup coffee and tea brewing systems under the Keurig® brand name to the AFH and AH channels. Keurig offers a brewer line-up that is differentiated by channel and size of customer, for the AFH channel, and by features of the brewer for the AH channel. Keurig also offers a selection of brewers for the hospitality, wholesale club and consumer direct channel, and a brewer specifically designed for travel.
As of September 26, 2009, the Company had 1,499 full-time employees and 18 part-time employees. We supplement our workforce with temporary workers from time to time, especially in the first quarter of each fiscal year to service increased customer and consumer demand during the peak November-December holiday season.