Green Mountain Coffee Roasters 3.0

Martin Redfield profile picture
Martin Redfield

Green Mountain Coffee Roasters (NASDAQ:GMCR) has provided investors, both long and short, with quite a ride over the past year or so. Emerging from an extended hyper-growth period, investors have been anxiously waiting to see what is next for the company. Will they still manage to produce growth at a more modest, sustainable level, or contract into irrelevance? Based on their positive quarterly/annual report in November 2012 and recent initiatives, it is clear that GMCR is responding to their circumstances, so what can investors expect? 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.

GMCR 1.0 and 2.0

Green Mountain Coffee Roasters started life as a premium coffee shop in Waterbury, VT in 1981. The coffee that they roasted for their cafe acquired a reputation and following, and the company branched out to providing bagged coffee via a variety of retail and wholesale outlets. The company didn't achieve national exposure during this phase, and was little known outside the northeast US. Even though GMCR 1.0 didn't provide a particularly interesting model, their products were popular and provided enough of a growth rate for their groundbreaking transition. They made their first K-Cups during this period, providing manufacturing and distribution in partnership with Keurig.

In 1996, GMCR acquired a minority stake in Keurig. While this was the catalyst for the single-serve growth to follow, GMCR 2.0 really began when they acquired the rest of Keurig ten years later. GMCR's strategy was to sell the brewers with little or no profit, and make their money on sales of the patent-protected K-Cups. Through a series of partnerships and acquisitions, Green Mountain ended up with over 200 owned or licensed varieties of K-Cups over the next several years. This razor/blade model provided spectacular growth

This article was written by

Martin Redfield profile picture
I am a scientist by training and trade. I have Bachelor's and Master's degrees in Math, and Doctorate in Computer Science. My passion is building mathematical models of stock behavior, and implementing them in computer simulations. But after years of investing with both technical and fundamental approaches, my biggest profits have consistently come from in-depth study of all aspects of a company.

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