Starbucks Brews Heavenly Coffee With Green Mountain Roasters

Starbucks’ strategic alliance with Green Mountain is a good deal for investors.

Feb 2, 2014 at 7:00AM

Starbucks' (NASDAQ:SBUX) strategic alliance with Green Mountain Coffee Roasters (NASDAQ:GMCR) has been a match made in heaven, and good for consumers and investors too. The two first teamed up back in March 2012 to make Starbucks coffee available in Green Mountain's line of single-serve coffees brewed in its Keurig system.

While Starbucks has its own at-home brewing system -- a segment the company sees as strategically significant for future revenue growth -- the company's recognition of Green Mountain's strength in this sector was wise. Broadening the alliance in 2013 was a no-brainer for both companies.

Starbucks' first-quarter results
Starbucks' guidance was positive in its fourth-quarter announcement, and now the results are in. In short, profits beat expectations, revenue was a miss, and same-store sales were "light." But the company boosted its 2014 fiscal-year outlook.

Last week, Starbucks reported revenue of $4.2 billion -- missing expectations of $4.3 billion. Moreover, the company acknowledged that same-store sales growth of 5% was below the 6% consensus view on the Street. Chief Executive Howard Schultz said in a conference call that margins also suffered in the second half of December as foot traffic in its shops fell off.

"This quarter will go down as a turning point in the overall way people are shopping ... This is going to be an ongoing issue, and it's happening faster than most people think," said Schultz. Here, the coffee king was referring to Internet sales. "Holiday 2013 was the first in which many traditional brick-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way," he said.

Starbucks' enhanced digital presence and mobile-payment platform will help the company make the transition. And record gift card numbers should come pouring in like a hot mocha latte this year. Schultz also noted Starbucks now has 7 million users of its "My Starbucks" loyalty cards.

In short, Starbucks is being positioned to make a bigger push into digital and Internet sales. Meanwhile, foot traffic is bound to bounce back in its U.S. stores. As coffee lovers return, they will probably take notice of the La Boulange line of baked goods and sandwiches. The acquisition of Teavana is also promising, as tea lovers buy into the program.

These steps, along with other initiatives like the expansion into the Asia-Pacific region and broadening its strategic alliance with Green Mountain, will continue to support revenue and earnings. And the company believes the future looks good. Starbucks raised the range of its full-year earnings outlook to $2.59-$2.67 a share from the $2.55-$2.65 range it predicted in October.

Green Mountain keeps the home-brew fires burning
Green Mountain Coffee Roasters is a leader in specialty coffee makers with its Keurig brewing technology. The company continues to grow value with new product development plans, which it believes will increase its market share -- currently about 13% of U.S. households.

The at-home brewer's lack of a retail presence is a concern for future growth, however. But Green Mountain's making a foray into retail stores, which will support sales growth. In fiscal year 2013, Green Mountain posted top-line growth of 12.9%. The company also reported solid growth in operating profit -- and a stockpile of cash to the tune of $836 million for the time period. That's a lot of green coffee beans, indeed.

Green Mountain plans to announce financial results for its fiscal 2014 first quarter in a press release after close of business on Wednesday, Feb. 5, followed by a conference call. So investors should steam a cup of their favorite Starbucks brew and tune in.

The last sip
Starbucks' relationship with Green Mountain continues to be a win-win: Starbucks needs Green Mountain as a platform for future at-home beverages that can be served up in a Keurig Brewer. Meanwhile, Green Mountain can capitalize on the Starbucks brand as it captures its ally's consumers -- the Keurig machine is being sold at Starbucks retail stores as part of their enhanced alliance in 2013.

At the end of the coffee date, the ongoing relationship between Starbucks and Green Mountain is a sweet deal for both of the coffee brewers as well as a good match for their customers and investors.

A sweet deal for investors like you
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

 

Kyle Colona has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters and Starbucks. The Motley Fool owns shares of Starbucks. 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. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers