Green Mountain (GMCR) Jumps on Strong Starbucks (SBUX), Industry Nielsen K-Cup Data

October 11, 2012 10:58 AM EDT Send to a Friend
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Price: $145.24 +0.86%

Rating Summary:
    9 Buy, 9 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 28 | New: 14
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Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is seeing notable upside (+2%) mid-day which appears related to positive analyst commentary on K-Cup data that hit a 4-week record for the industry and Starbucks (NASDAQ: SBUX).

Analysts at Wells Fargo note:

  • KCups Continue to Drive SBUX Ground Coffee $ Sales Growth - In the 4weeks ending 9/29/12, SBUX $ sales in the Ground Coffee category (incl. packaged ground coffee and KCups) increased 48% y/y vs. 52.7% last month. Growth was driven by 40.8% y/y growth in eq. units and a 5.1% increase in avg. eq. unit price. KCups accounted for >100% of y/y $ sales growth in the recent 4wks, with Starbucks brand (non Kcup) $ sales declining 13% y/y, driven by 13.5% unit decline (vs. +3.2% last month) and 0.6% pricing growth (vs. 2.7% pricing decline last month).

  • SBUX Promos Higher Than Historical Average on Both K Cups and Packaged - SBUX K Cups have gotten more promotional with 63.1% of SBUX KCups sold on promo higher than its historical average. Promos on Starbucks brand ground coffee (ex. kcups) pulled back slightly as 53.1% of units were sold on promo in the recent 4wks down from 57.3% last period but still elevated compared to the historical average. SBUX's $ share of the Ground Coffee category was 10.0% in the recent 4wks, vs. 10.7% last month and 7.6% YTD.

  • KCups' Share of Ground Category Reaches Another New High But KCups Promos Higher - Total KCups $ sales as a % of the Ground Coffee category were 23.0% vs. 22.7% last month another new high. KCup unit share of the ground category was flat to last month at 14.4%. Total KCup $ sales increased 104.4% y/y on a 99.3% increase in avg. eq. units, suggesting ~5.0% avg. eq. unit pricing. SBUX K Cups $ sales increased 9.4% sequentially vs. 10.1% last period, driven by a 13.3% increase in eq. units and a 3.5% decline in avg. eq. price. SBUX share of Kcups reaccelerated to 16.9% of KCup $ sales vs. 16.3% last period. GMCR Kcup
    share declined modestly in the recent period to 57.0% vs. 57.8% last period.

    Analysts at Goldman Sachs also commented on the Nielsen data, reiterating their Conviction Buy List rating and $62 price target on Starbucks.


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