Here, have a nice cup of joe. You'll need it if you own the stock I'm about to discuss.
Premium-coffee roaster and coffee-shop operator Diedrich Coffee
Cost of sales increased 21.2%, far outpacing the overall revenue improvement, and sales, general, and administrative expenses did the same, with a 16.3% year-over-year increase. The company is trying to do something about the problem, having just announced the sale of its remaining company-owned stores to 800-pound coffee gorilla Starbucks
To be even more specific, the star segment has an identifiable superstar of its own, namely the coffee pods that fit the Keurig K-Cup single-serve coffeemaker. That product line alone grew sales 55% year over year, a $4.9 million improvement that provided over half of the company's overall sales boost. In fact, demand outstripped production capacity and Diedrich had to outsource some of its K-Cup production in the fourth quarter. That increased production costs and spurred the company to install a third K-Cup production line to meet future demand.
Diedrich has had a supplier deal with Keurig since 2000, but the company hasn't made it clear when that contract might expire. When it does, it could spell the end for this lucrative segment, because rival coffee roaster Green Mountain Coffee Roasters
So Diedrich might as well enjoy the wide distribution its Keurig-compatible coffee enjoys today through outlets like Federated Department Stores'
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Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he used to hold a few Diedrich shares. The company's coffee won't leave the bitter aftertaste that the business performance does. You can check out Anders' holdings if you like. Foolish disclosure comes steaming hot with a side of biscotti.
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