Single-cup coffee maker Green Mountain Coffee Roasters (NASDAQ:GMCR.DL) has defied skeptics like myself who thought its business was more stale than day-old joe after the patents expired on its K-Cup dispensers.

Not that the stock didn't crater. After peaking at well over $100 a share in 2011, shares tumbled into the mid-teens last year, but they have shown surprising resilience and were recently as high as $83 a stub. Not bad for a business model thought to have as much strength as a used coffee filter.

Green Mountain's stock has now pulled back about 17% from those highs, and while I've been a longtime bear on the company, I think it's once again gotten as good as it's going to get.

Sip on this
The argument for greater growth looks good on the surface. Even after the entrance of competitors into the coffee pod market, Green Mountain still owns about 60% of the single-serve market with the rest of the market bunching up in the mid-teens. Starbucks (NASDAQ:SBUX) is a distant second at 18% and J.M. Smucker (NYSE:SJM) is third at 16% (in addition to its jams and jellies, Smucker owns coffee names Folgers and Millstone). 

The folks at Packaged Facts think the market could expand further. The overall coffee market grew 10% last year, driven largely by an 82% increase in the single-serve segment to $1.8 billion, and even better, they see the possibility of it driving higher to $5 billion by 2016.

Analysts at Rabobank concur. Where Nestle (OTC:NSRGY) owns half the single-serve brewer market (Green Mountain's Keurig and Vue has almost a quarter of the market share), it says coffee pods represent 14% of all at-home consumption.

Going cold
Yet as a check on the enthusiasm, the analysts say it's not in the name-brand niche that the greatest growth will be seen, but rather in the private-label business. While single-cup brews had blowout growth, private-label K-Cups will run from $125 million this year to over $750 million by 2016, an 80% compounded growth rate compared to a projected 28% to 29% rate for the single-serve market overall.

That's borne out by the slowdown Smucker has experienced, where it had incremental sales of $30 million for six straight quarters, only to see it plunge to $11 million last time out. The cause, said Smucker, was the proliferation of "unlicensed participants," those dratted private-label K-Cup makers. 

Similarly, K-Cup sales at Starbucks accounted for $232 million in revenues in fiscal 2012, or 15% of its consumer products segment. In comparison, K-Cups represented 5.9% of segment revenues in the second quarter, down from 7.8% in the first quarter, for an average of almost 7% over the first half of the year.

Reheating yesterday's cup
Although Green Mountain has said it plans to build on its rather strong second-quarter results, it seems to me the market is moving away from the coffee maker's base. Keurig machine sales were down 9% in the quarter, and despite adding more strategic alliances to those like Starbucks and Dunkin' Brands, the growth and proliferation of private-label coffee pod makers seems like it will dull the sharpness of its performance.

Many Green Mountain bulls were in denial over the impact the loss of patent protection would have on its business. Are they experiencing the same kind of blindness with the rise of unlicensed participants? Let me know in the comments box below why you think Green Mountain Coffee Roasters can once again perk up its business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.