Green Mountain Coffee Roaster shares climb
Green Mountain shares climb after rival brewer Starbucks releases Verismo sales
NEW YORK (AP) -- Shares of Green Mountain Coffee Roasters Inc. got a boost Friday after an analyst noted that sales of a competing coffee brewer introduced by Starbucks appeared soft out of the gate.
THE SPARK: In reporting its latest quarterly results Thursday, Starbucks Corp. said its Verismo coffee machine was off to a strong start after selling more than 150,000 units since its introduction. But SunTrust analyst Bill Chappell the figure was "clearly underwhelming," even when taking into account that the rollout was limited to select Starbucks stores and specialty retailers.
THE BACKGROUND: Green Mountain, based in Waterbury, Vt., was a pioneer of single-serve coffee in the U.S. with its Keurig machines and coffee pods. The company grew quickly but struggled as a number of its patents expired and the company faced a federal inquiry into its accounting practices. Starbucks' announcement last year that it was entering the market with the Verismo machine had also weighed on its shares.
When considering the machines were sold through 6,000 outlets, Chappell said that translated to about eight machines sold at a store per month, or about one at a store every four days.
"This data point confirms our findings from channel checks that Verismo is off to a slow start at best," he wrote.
Starbucks executives said in a conference call with investors Thursday that they expect Verismo to be a major source of growth in coming years. CEO Howard Schultz also said the company has an advantage because it can make the machines highly visible through its large network of cafes. But Chappell said the initial sales results, along with mixed reviews from customers, should ease concerns that the machine will be a "category killer."
He affirmed his "buy" rating on Green Mountain.
MORE ANALYSIS: On Thursday, Key Banc analyst Akshay Jagdale had also said a shortage of single-serve coffee products could help Green Mountain. Through conversations with numerous companies in the industry, Jagdale said he found that some manufacturing and quality issues point toward a shortage of product.
As a result, he said some retailers are reconsidering Green Mountain products as an alternative to non-licensed manufacturers,
SHARE ACTION: Shares of Green Mountain were up 70 cents, or 1.6 percent, to $44.48 in morning trading. Starbucks shares rose $2.15, or 4 percent, to $56.72.
