Monthly Notes On Coffee Industry: Starbucks & Keurig Green Mountain

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Trefis
GMCR: Keurig Green Mountain logo
GMCR
Keurig Green Mountain

Arabica coffee prices are behaving in total contrast to last year. In 2014, coffee prices rose 50% on account of short supply prediction. However, this year, better-than-expected weather conditions in Brazil have led to a sudden decline in the Arabica coffee prices. Coffee prices fell further in the month of June, as conditions for crops improved in Brazil and other South American nations.  The September coffee futures price is trading near its one-year low at $1.32. [1] Optimum rain in Brazil helped the crop in overcoming the effect of last year’s drought.  Brazil’s crop agency has estimated a production figure of 32.9 million bags of Arabica this year, up 1.9% from last year. [2]

cofffee

Here’s a quick round-up of some news related to the coffee related companies covered by Trefis.

Relevant Articles
  1. Scenarios That Can Impact Keurig Green Mountain’s Stock
  2. Scenario: Is This The Stagnation Stage For Keurig Brewers?
  3. Dull Keurig 2.0 Launch & Brewer Recalls Hamper Keurig’s Revenue Growth In Q1
  4. New Brewer Platforms To Drive Keurig Green Mountain’s Growth In 2015
  5. Dr Pepper Snapple- New Addition To Keurig Green Mountain’s Arsenal
  6. The Year 2014 In Review: Keurig Green Mountain

Starbucks

On June 16, 2015, Starbucks Corporation (NASDAQ: SBUX) decided to close all 23 of its La Boulange retail locations, as well as two manufacturing facilities serving those stores, due to the belief that the La Boulange segment is not sustainable for the company’s long-term growth. However, the company plans to continue serving the La Boulange food at its Starbucks retail locations.  [3]. Moreover, the company announced the pricing of underwritten public offering of senior notes, with a plan to use the net proceeds in general corporate purposes, as well as in the repurchase of Starbucks common stock under the ongoing share repurchase program. [4]

Starbucks’ stock increased gradually from $52 to $54 during the month of June. Our price estimate for the company’s stock is $48, implying a market cap of $72 billion, which is 11% below the current market price. Trefis estimates Starbucks’ net revenues to reach $19.35 billion for the year 2015.

See our complete analysis of Starbucks

Keurig Green Mountain

In the Keurig Kold Investor Presentation, Keurig Green Mountain (NASDAQ:GMCR) mentioned that it is going to release the Kold brewer in the fall of 2015 on online platforms, and later on in retail stores by the end of the holiday in 2016. Such a delayed entry of Kold brewers to retail shelves led to a steep drop in the stock price. On the other hand, on June 25, Keurig announced the launch of Green Mountain coffee organic, a new line of premium coffees. This launch marks the first collection of double certified (both organic and Fair Trade certified) line of coffee ever available on the company’s hot brewing system. [5]

Keurig Green Mountain’s stock dropped from $86 to $77, the 12-month low for GMCR, during the month of June.  Our price estimate for the company’s stock is $93, which is more than 20% above the current market price. Trefis estimates for Keurig’s net revenue is $5.5 billion for the year 2015.

See our complete analysis of Keurig Green Mountain

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Notes:
  1. Coffee futures, www.barchart.com []
  2. Coffee prices fall but Brazilian production estimated lower, International Coffee Organization []
  3. Starbucks food strategy and La Boulange update []
  4. Starbucks prices $850 million of senior notes []
  5. Green Mountain coffee launches new double-certified and Fair trade line of premium coffees []