Green Mountain Shares Surged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of single-serve coffee-slinger Green Mountain Coffee Roasters (Nasdaq: GMCR  ) were getting gulped down by investors today, rising as much as 14% in intraday trading after investors achieved a level of comfort with the company's relationship with coffee giant Starbucks (Nasdaq: SBUX  ) .

So what: Fear the Verismo! Or, at least, that's what many Green Mountain investors seemed to be thinking after Starbucks revealed its single-serve homebrew machine earlier this month. However, as both companies were quick to point out, the Verismo is a high-pressure brewer designed to make specialty coffee drinks like cappuccinos, while Green Mountain's Keurig brewers are focused on low-pressure filter coffee.

Worries were further allayed today as Green Mountain announced that not only will the two companies continue their partnership -- Starbucks sells branded coffee and Tazo tea pods for Keurig brewers -- but even expand it. By fall of 2012, Starbucks will also offer single-serve cups for Green Mountain's new, higher-end Vue brewer.

Now what: It's certainly reasonable for Green Mountain investors to be encouraged by today's announcement. That said, I remain a skeptic that Green Mountain is safe from head-to-head competition from big ole 'Bucks. The latter company is looking for growth in multiple new directions. Verismo is one, but it also previously launched a successful instant coffee and now is attacking the energy-drink market with a new "Refreshers" line. If the Verismo works out for Starbucks, would it really be that surprising to see it go after Green Mountain directly?

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The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended writing covered calls on Starbucks. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.


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