What: Shares of Keurig Green Mountain (GMCR +0.00%) fell 11.1% in June, according to S&P Capital IQ data, continuing the trend that has cut the company's share price in half since the end of last year.
So what: After the incredible success of its K-Cup coffee machines, Keurig made a strategic blunder last year when it launched a new machine that did not work with K-Cups from competing brands. Keurig's growth has slowed dramatically, with sales of its coffee machines collapsing during the most recent quarter.
The failure of the Keurig 2.0 sent the stock on a downward trajectory that has yet to let up:
UBS, previously bullish on the stock, downgraded it to neutral in June, citing K-Cup concerns and skepticism regarding Keurig Kold, a machine that can make cold beverages such as sodas and sports drinks. The Keurig Kold was unveiled in May, but it carries a high price tag compared to competing machines from SodaStream. It also doesn't help that SodaStream is currently struggling in the United States, indicating the market for such machines is not strong.
The decline of Keurig's stock price in June resulted from all of these issues weighing on investors' minds. The core K-Cup business is in trouble, the Keurig Kold has all the makings of a flop, and earnings are expected to decline this year, something that hasn't happened for nearly a decade.
Now what: Keurig is in a tough spot. The company upset customers by artificially limiting their options with the Keurig 2.0 in an attempt to counteract the threat of discount K-Cups from competitors. Most of Keurig's sales come from K-Cups themselves, not the machines, and if the company can't recover from this blunder, its bottom line might never be the same again.
The Keurig Kold doesn't look like it will save the company. It is expected to be priced around $300, far more than the cost of a SodaStream system, and drink pods will cost about $1 each. Given SodaStream's recent troubles, it's difficult to imagine the Keurig Kold succeeding in any significant way. While June was a bad month for Keurig stock, the worst might be still to come.
