GMCR has taken a huge hit since the highs put in around September 2011, just up over $100 a share. Currently they are trading at $45.35 a share, which is up from the lows at $18, which was last seen June 2012. Its pretty clear that this stock has been extremely volatile in the past couple years. I believe the main reason for this, is there initial first move introducing K-cups… people love to wake up and have their cup of coffee ready in 20 seconds. The negative part about GMCR was when their patents ended for the K-cups and allowed anyone to produce their own versions of the K-cup. It really adds insult to injury when Starbucks is one of your main competitors and they start to sell the same product, but with their brand behind it. It basically leaves Green Mountain without a true identity, and just another company in the coffee industry.
So, this comes back to the new CEO, Brian Kelley. Yes, I do believe that Coca-Cola would be a good fit for Green Mountain, and here’s why….
Coca-Cola obviously has enough cash to buy-up GMCR, which sits at a market cap of 6.75B + debt. Coke is also currently far from selling just a singe-beverage, as they have hundreds of brands under their name. Another argument is that Americans are shying away from consuming soda, and turning towards diet drinks, tea, and you guessed it…coffee.
Coca-Cola doesn’t necessarily ‘need’ Green Mountain, but the upside for it could be tremendous if marketed correctly. Obviously, they have Starbucks to compete against but people still know who Green Mountain Coffee is, and as time passes and Starbucks starts to take up more of the market share, that memory will slowly fade of GMCR even existing. A move needs to be taken soon if there is going to be Green Mountain on the shelves five years from now.
Author: Peter Nitso
Twitter: @PeterNitso