Weekly Notes On Coffee Industry: Keurig Green Mountain & Starbucks

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Keurig Green Mountain

According to several weather forecast agencies, this El-Nino might be the strongest since 1997-1998. The oceanic disturbance is most probably going to disrupt crops in several agricultural nations. In Indonesia, it is being predicted that El-Nino, which is expected to peak around December 2015, will lower the crop production. Coffee production in the nation is estimated to drop by 7% to 0.58 million metric tons in 2016. [1] The December’15 contract of ICE coffee futures is showing signs of a rebound, after the prices touched the low of 115 cents per pound in mid-September.

futures

However, an increase in coffee prices will affect all the major companies that use coffee as a major raw material. Some economists are predicting up to a 107% rise in coffee prices. On the other hand, the El-Nino is expected to impact 18% of the Colombian crops as well, according to the National Growers’ Association Fedecafe. [2]

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  4. New Brewer Platforms To Drive Keurig Green Mountain’s Growth In 2015
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In addition, according to a report by Bloomberg, the increasing consumption of coffee and climate change over the next 10 years will cause a shortage of coffee beans around the world. [3]

Here are some updates related to coffee companies covered by Trefis:

Starbucks

On October 6, 2015, Starbucks announced the appointment of Gerri Martin-Flickinger as the company’s first Chief Technology Officer (CTO) effective from November 2. [4] She will be in-charge of global IT function and technology agendas for Starbucks. Furthermore, the company announced the introduction of a mobile ordering feature, Mobile Order & Pay, to roughly 300 company-owned stores in Canada’s Toronto region. [5] According to the company, Toronto has some of the busiest North American Starbucks stores, and this feature will be convenient for the customers, enhancing their experience.

SBUX’s stock rose from $57 to $59.50 during the entire week (October 5th– 9th). Our price estimate for SBUX stock is $55, which is roughly 8% below the current market price.

sb st

Keurig Green Mountain

On September 29, 2015, Keurig Green Mountain launched its first cold beverage brewer that will allow its customers to make cold beverages at home. Users will be able to prepare their favorite beverages from brands, such as Coca-Cola (NYSE:KO) and Dr Pepper Snapple (NYSE:DPS). [6] The product will be sold exclusively through online platforms: Keurig.com.  The brewer specialist plans to roll out the Keurig Kold systems to retail stores in six more cities: Atlanta, Boston, Chicago, Dallas, Los Angeles, and New York by the end of October 2015.

However, the Keurig Kold unit is available at $370, which is much more expensive than Keurig 2.0’s most expensive range. Furthermore, the Keurig Kold pod containing four 8-0z glasses will cost roughly $5, making it another negative aspect of the product for an average household.

GMCR stock bounced back from $51 to $58 during the entire week (October 5th-9th). Our price estimate for GMCR stock is $60, which is roughly 3% above the current price estimate.

gm st

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Notes:
  1. El-Nino causing lower coffee and crude palm oil production in Indonesia []
  2. El-Nino drought threatens 18% of Colombian coffee crops []
  3. Horrifying news: The world is facing a major coffee shortage []
  4. Starbucks names Gerri Martin-Flickinger Chief Technology Officer []
  5. Starbucks will bring Mobile Order & Pay to Canada On October 13th []
  6. Keurig Green Mountain announces the launch of Keurig Kold []