WATERBURY, VT -- Green Mountain Coffee Roasters Inc.'s shares plunged last week after two of the largest U.S. supermarket chains announced plans to launch store-branded portion packs compatible with Keurig single-cup brewers.
Safeway Inc. said on June 15 that it will sell its own branded pods that are compatible with Green Mountain's Keurig brewers, but at prices below the Vermont coffee roaster's own K-Cups.
The news came just days after rival grocery chain Kroger Co. said it plans to offer store-branded coffee portion packs for Keurig brewers. That news, on June 11, sent Green Mountain shares down as much as 10% to a 2-1/2-year low.
Competition has been heating up for Green Mountain as more companies are introducing their own brewers and portion packs that compete with its Keurig machine. Revenue from K-Cups currently make up about 75% of Green Mountain's business. The Vermont coffee roaster sells its own coffee in K-Cups, but also sells the portion packs with coffee from many other brands, including Starbucks, Dunkin' Donuts and Folgers.
Starbucks Corp. partnered with Green Mountain last year to sell K-Cups for use with the Keurig machine, but in March the Seattle coffee giant announced it will also sell its own Verismo line of single-cup brewers. The Verismo will differ from the Keurig's K-Cup and new Vue machines (the K-Cup successor) in that it's a high-pressure system designed for making espresso drinks. | SEE STORY
And while Green Mountain has numerous patents that cover all aspects of the Keurig machine, two patents related to the K-Cup expire in September, opening the door for more competition.
Green Mountain has already sued two companies -- Rogers Family Co. and Sturm Foods -- for patent infringement when they started selling unlicensed Keurig-compatible K-Cups. The patents Green Mountain claimed they infringed are not the ones expiring.
Separately, Green Mountain shares fell another 5% to a new low on June 7 when a research report showed it had a "noticeable slowdown" in sales of K-Cup coffee pods to U.S. offices in May.
Boston-based research firm Detwiler Fenton said sales growth typically slows in June and rebounds in August. The report attributed Green Mountain's earlier-than-expected slowdown to the installation of competing single-cup systems and portion packs in offices. The office coffee service (OCS) segment accounts for about 10% of the company's sales, according to the report.
Green Mountain shares have tumbled nearly 80% since peaking above $110 in August and September, due to questions about its business strategy and growth trajectory and controversy over its management and accounting practices.
The company stripped founder Robert Stiller of his chairman title and ousted William Davis as lead director after they sold shares to meet a margin call on loans secured by their stock in the company, breaking the company's trading policies. | SEE STORY
The stock selloff followed a stock tumble on May 3 after Green Mountain issued lower full-year profit projections after selling fewer brewers and K-cups than expected in its fiscal second quarter. | SEE STORY