Starbucks Brews Heavenly Coffee With Green Mountain Roasters

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

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.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2810275, ~/Articles/ArticleHandler.aspx, 9/3/2015 3:14:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Kyle Colona

Kyle is a Long Island based writer and a Motley Fool contributor since January 2013. He has a broad background in the financial sector. His business and political writing is widely available on the web.

Today's Market

updated Moments ago Sponsored by:
DOW 16,395.48 44.10 0.27%
S&P 500 1,955.95 7.09 0.36%
NASD 4,747.55 -2.43 -0.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 2:58 PM
GMCR $57.40 Up +0.84 +1.49%
Keurig Green Mount… CAPS Rating: **
SBUX $54.82 Down -0.44 -0.80%
Starbucks CAPS Rating: ****