If You've Ever Been Thirsty, This Stock Is for You

With the announcement that Green Mountain Coffee Roasters has accepted a strategic investment from Coca-Cola, now is finally the time to invest.

Feb 8, 2014 at 4:00PM


Warren Buffett has famously recommended only investing in companies that you can understand. 

I understand thirst, and I'm buying Green Mountain Coffee Roasters (NASDAQ:GMCR) this month. Here's why.

Here's what happened
(NYSE:KO) announced that it was purchasing 10% of Green Mountain for $1.25 billion. Why is Coke investing in a coffee company? Because next year Green Mountain is launching what it calls Keurig Cold, a single serve beverage system designed for cold drinks -- soft drinks, teas, juices, and so on -- and Coke wants its brands to be the first cold drinks available on the platform.

The implications are huge for Green Mountain. First, this deal is nothing short of a ringing endorsement for the future of the company from nothing less than the leading beverage company in the world. But what else is there to this story that has Coca-Cola and me investing so enthusiastically?

1. The single-serve concept has been proven as awesome
Green Mountain started as a coffee business. With the Keurig platform, the company has revolutionized the way millions of Americans get their daily cup of Joe. According to a recent Bank of America note, single cup coffee is now 30% of the market, nearly quadrupling from just three short years ago.

Green Mountain's platform is today in over 15 million households and serves coffee brands from Starbucks (NASDAQ:SBUX) to Caribou Coffee to its own Green Mountain grinds. 

The single serve concept and Keurig platorm just works. Its convenient, its easy, and it produces a beverage that tastes great. And because of this, its taken the coffee world by storm.

2. Massive market to sell cold beverages
If the market for coffee is huge, the market for cold beverages is goliath. Coke is the world's leading beverage company, and will report year end financials later this month. Through the first three quarters of 2013, the company recognized sales of $35 billion. PepsiCo (NYSE:PEP), the second largest global beverage brand, reported revenues of $29 billion for the same period in its Americas, Europe, and Asia/Middle East/Africa beverage units (PepsiCo also has a substantial food business, which has been excluded in this revenue figure).  

Green Mountain reported an impressive (but tiny compared to Coke) $4.3 billion in annual revenues for its last year end back in September 2013. The growth potential in cold beverages is just incredible for Green Mountain. Coke and Pepsi sold a combined $64 billion of beverage products in nine months in 2013. That's nearly 15 times what Green Mountain reported in its most recent full year!!

In its latest SEC filing, Green Mountain reported that 100% of revenues were generated in the U.S. and Canada. The company states that global expansion is part of a "longer-term" growth plan. The new partnership with Coca Cola dramatically increases Green Mountains chances for international success. Coca Cola has long established relationships, distribution channels, and expertise all over the globe. The value of this knowledge and experience to a young company with international ambitions should not be understated. Green Mountain will be going global, and I think it will be sooner rather than later.  

3. What if Keurig Cold Diet Coke doesn't taste as good as bottled Diet Coke?
One of the largest risks is the quality of the beverages produced by Keurig Cold. The original Keurig product was successful because, among other reasons, it produced delicious coffee. Keurig Cold hasn't yet come to market, and its still to be determined if it will stack up against the cold drinks already in your refridgerator.

Coca Cola executives, smart investors as they are, had the same concern. Green Mountain CEO Brian Kelley stated that Coke has actually been in discussions about the deal for months, and have been very close to the development process for Keurig Cold. Why? Because they needed to be sure that a Coca Cola poured from a Keurig would taste like, well, a Coca Cola.

Through this process, these executives became comfortable with the product and backed up their confidence with $1.25 billion of company money. If these executives feel $1.25 billion comfortable with the product, then so do I.

Feeling thirsty yet?
Taken altogether, the investment thesis for Green Mountain is pretty simple. It produces a fantastic product that is transforming the method for coffee consumption in the United States. It has tremendous growth opportunities both in their existing coffee niche, as well as a treasure trove awaiting in cold beverages. Coca-Cola has vouched for the company with a $1.25 billion vote of confidence, and will be bringing its globally leading cold beverage brands to the Keurig platform. 

Great products, tremendous opportunities for growth, and backing from the global industry leader. Suffice it to say, I'm buying.

Thirsty for more timely stock picks?
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Jay Jenkins owns shares of Green Mountain Coffee Roasters. The Motley Fool recommends Coca-Cola and Green Mountain Coffee Roasters and owns shares of Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers