Green Mountain may never compete with giants like Starbucks, which had more than $6.4 billion in net revenues last year, but its ability to spot trends and capitalize on them has made it a major player in a growing number of niche markets. Though it sold off its retail stores in 1998 to focus on wholesale sales–it ships 20 million pounds of coffee annually to 8,000 supermarkets, resorts and other vendors–the company maintains a retail online and catalog operation. In total, annual sales have nearly doubled since 2000, to about $162 million.
Its latest endeavor has less to do with beans than brewing. In June, Green Mountain completed its acquisition of Keurig, one of the leading makers of single-cup home and office brewing systems. Customers bought 185,000 units last year, boosting net sales by 66 percent. The $160 million deal is a hefty investment for a company whose 2005 fiscal year net income was about $9 million. Butthe Keurig purchase gives Green Mountain another vehicle for its coffee, since the machines work only with special “K-cups,” and Green Mountain varieties make up the majority of K-cups sold. “We thought the one-cup system was such a revolutionary process,” says Stiller. “We said, ‘Let’s do it.’ We see very significant growth.”
It’s too early to know if his prediction will come true, but analysts expect that the deal will pay off. Keurig, whose machines cost between $150 and $200, has a built-in audience among premium coffee connoisseurs who already buy beans from Green Mountain. “Among higher-end consumers, Keurig is the machine of choice,” says Scott Van Winkle, an analyst with financial services firm Canaccord Adams Inc. The brewing system is already sold in 5,000 retail stores nationwide, and analyst Mitch Pinheiro, who covers the company for investment firm Janney Montgomery Scott, says at its current growth rate Keurig may sell nearly a million systems by 2009. There’s always a chance that the one-cup trend could fizzle out. But Don Montouri of Packaged Facts, a market-research firm, doesn’t see that happening. “I don’t know if it will knock bags of coffee off the shelves, but people’s coffee-consumption habits have changed.” And once again, Green Mountain is poised to profit from it.
