Green Mountain Continues to Climb

In classic three-dollar-prophet manner, I made a stab in the dark at the future of Green Mountain Coffee Roasters'  (NASDAQ: GMCR  ) new Keurig Vue brewer last year. In November, I said that I'd like to see cups on pace to increase year-over-year sales by 30% by the end of 2013. We're now well past the halfway mark, and things are looking all right. I don't think I'll ever love Green Mountain, but the reasons to hate it are quickly disappearing.

Sales go up and down
In the company's most recent earnings release, it reported an 18% increase in year-over-year sales, but did not break out the Vue versus K-Cup numbers. The rise was driven by a 21% increase in actual units, but product mix and promotions pushed the overall revenue increase down slightly. While single-serve packs increased, brewer sales fell 4% over the same period.

To combat that, the company has recently announced a new system called the Bolt. The brewer is targeted at offices instead of homes. The company has estimated that there is a $2 billion opportunity in office brewers, and the Bolt is aimed at brewing pots of coffee to address that market. Analysts have been happy with Green Mountain's initiatives and performance, and on Tuesday, Zacks upgraded Green Mountain's stock to a strong buy.

The Keurig is certainly doing better than I initially thought it would, given the strength of Starbucks, and its introduction to the single-brew market. But the Verismo brewing system hasn't held Green Mountain back at all. In fact, Starbucks launched the Verismo, and then reaffirmed its commitment to the Keurig system with an extended deal with Green Mountain.

The long term
By the end of the year, I'd still like to see single-serve cups increase more. The new Bolt system also uses the Vue's new pack design, which circumvents the K-Cup's problem of no longer being under patent. If the Bolt can catch on, it may help support that growth. Hopefully, it will also help push brewer revenue higher.

The company has forecast that single-serve packs will increase their growth pace in the next quarter, especially as retailers gear up for the holiday season. The company is also working to turn some unaffiliated K-Cup makers under the Green Mountain banner. That would potentially be good news for both producers and Green Mountain, as costs dropped and brand selection increased.

The past year has been good to Green Mountain, and the stock has risen 50% over the last 12 months. With the plan currently in place, and the new range of products on the market, I can't see any reason for Green Mountain to fall apart. The holidays are a great time for Green Mountain, and this year shouldn't be any different.

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