Keurig Green Mountain Goes Back to Private School

Keurig Green Mountain  (NASDAQ: GMCR  )  is quietly disrupting the disruption of its own disruption. The company behind the popular Keurig coffeemaker that brews premium java in single-serve doses announced this morning that it is the exclusive maker of Harris Teeter-branded K-Cup packs. 

Harris Teeter operates  231 high-end supermarkets across eight different states. Grabbing the grocer's private-label deal for K-Cups is a neat trick for a company that worrywarts pegged as doomed when two key patents governing its portion packs expired nearly two years ago. Skeptics worried that this would eliminate Keurig Green Mountain's ability to command healthy margins on its K-Cups. The floodgates would open for third parties to team up with retailers for their private-label needs.

However, grocers, warehouse clubs, and other chains are realizing that going with Keurig is about more than just getting the "Keurig Brewed" seal on their K-Cups. In fact, BJ's Wholesale Club turned to Keurig Green Mountain for its private-label K-Cup just a few weeks ago. Keurig Green Mountain argues that its experience and consistency make it the smarter choice, but the real ace up the company's sleeve is that new brewing platforms are coming. Keurig 2.0 -- and to a lesser extent Keurig Cold -- will hit the market in coming months with fresh patent protection on their portion packs. A retailer turning to cheaper outsiders to manufacture its private label may get a great price on self-branded K-Cups, but it won't be able to follow coffee drinkers who upgrade to the new brewer systems. 

Keurig Green Mountain is rolling. The stock has quintupled in price since its K-Cup patents ran out at the end of September 2012, and it obviously doesn't hurt that the world's largest beverage company has gotten thirsty enough to invest more than $2 billion for a 16% stake in Keurig Green Mountain. 

It also only helps that some analysts are seeing acceleration in K-Cup unit sales even before the new brewers roll out. Dougherty noted that unit sales growth had gone from the high single digits earlier in the year to 11.5% during the four weeks ending in mid-June -- before BJ's Wholesale Club and now Harris Teeter struck deals that will be incremental for Keurig Green Mountain.

Sparked by caffeinated growth and a compelling argument to win retailer private labels manufacturing, it's hard to bet against Keurig Green Mountain these days.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (1)

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: 3023039, ~/Articles/ArticleHandler.aspx, 8/28/2015 3:27:08 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...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated Moments ago Sponsored by:
DOW 16,607.93 -46.84 -0.28%
S&P 500 1,983.34 -4.32 -0.22%
NASD 4,816.67 3.96 0.08%

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

8/28/2015 3:10 PM
GMCR $54.00 Up +0.01 +0.02%
Keurig Green Mount… CAPS Rating: **