Wake Up and Smell the K-Cup!

Where's Major Dickason when you need him?

Shares of Peet's Coffee & Tea (Nasdaq: PEET) took a nosedive Tuesday, triggered by Dunkin' Brands (Nasdaq: DNKN) and its highly dilutive secondary stock sale. Yeah, I know, that's like selling your car because your bike has a flat tire -- there's no reasonable cause-and-effect action going on.

But the dive went even deeper on Wednesday after Peet's reported its own results. Taken together, it adds up to an 11% two-day drop.

Flat year-over-year earnings on 14% higher sales in the third quarter was better than the average Street projection, but early guidance for the 2012 fiscal year came in a bit light. Management sees sales rising about 10% next year, driving earnings about 20% higher.

Results like that would simply extend the current growth rates for another year -- and Peet's is already a relative laggard in the coffee industry. Its 8.4% annual sales growth on a trailing basis is slightly behind the respective 9%, 12%, and 10% boosts seen by rivals Caribou Coffee (Nasdaq: CBOU), Starbucks (Nasdaq: SBUX), and Krispy Kreme Doughnuts (NYSE: KKD). And then you have Keurig K-Cup owner Green Mountain Coffee Roasters (Nasdaq: GMCR) nearly doubling its yearly sales. Peet's just can't compete with numbers like that.

And the K-Cup is the not-so-secret weapon in this race. Peet's hasn't jumped on that bandwagon yet and seems to be leaving money on the table as a result.

What's worse is that the company doesn't seem to have any plans on joining the K-Cup crowd. The brand never came up in last night's analyst call; instead, Peet's hopes to drive sales with "a pipeline full of new, seasonally relevant flavors" throughout the year.

If you want to give Peet's management the benefit of the doubt, the Keurig craze just might turn out to be a fad after all. A long-lived fad, but still one destined to fade the same way I expect SodaStream International (Nasdaq: SODA) to fall by the wayside. And in that case, staying out of that market would make Peet's look smart.

But even then, I'd imagine that the company would recoup the investment in getting a K-Cup line up and running long before the machine goes out of favor. Personally, I don’t see a good reason not to do K-Cups right now.

Will Peet's ever wake up and smell the K-Cup, or will the company keep waiting for Major Dickason's charge that never comes? The only way to know for sure is to keep close tabs on the company. Our Foolish watchlist feature helps you do exactly that, and can even keep an eye on the entire coffee industry on your behalf:

• Add Peet's Coffee & Tea to My Watchlist.
• Add Green Mountain Coffee Roasters to My Watchlist.
• Add Starbucks to My Watchlist.
• Add Dunkin' Brands Group to My Watchlist.
• Add Caribou Coffee to My Watchlist.
• Add Krispy Kreme Doughnuts to My Watchlist.