Keurig Green Mountain Goes Back to Private School
Keurig Green Mountain is quietly disrupting the disruption of its own disruption. The company behind the popular Keurig coffeemaker that brews premium java in single-serve doses announced this morning that it is the exclusive maker of Harris Teeter-branded K-Cup packs.
Harris Teeter operates 231 high-end supermarkets across eight different states. Grabbing the grocer's private-label deal for K-Cups is a neat trick for a company that worrywarts pegged as doomed when two key patents governing its portion packs expired nearly two years ago. Skeptics worried that this would eliminate Keurig Green Mountain's ability to command healthy margins on its K-Cups. The floodgates would open for third parties to team up with retailers for their private-label needs.
However, grocers, warehouse clubs, and other chains are realizing that going with Keurig is about more than just getting the "Keurig Brewed" seal on their K-Cups. In fact, BJ's Wholesale Club turned to Keurig Green Mountain for its private-label K-Cup just a few weeks ago. Keurig Green Mountain argues that its experience and consistency make it the smarter choice, but the real ace up the company's sleeve is that new brewing platforms are coming. Keurig 2.0 -- and to a lesser extent Keurig Cold -- will hit the market in coming months with fresh patent protection on their portion packs. A retailer turning to cheaper outsiders to manufacture its private label may get a great price on self-branded K-Cups, but it won't be able to follow coffee drinkers who upgrade to the new brewer systems.
Keurig Green Mountain is rolling. The stock has quintupled in price since its K-Cup patents ran out at the end of September 2012, and it obviously doesn't hurt that the world's largest beverage company has gotten thirsty enough to invest more than $2 billion for a 16% stake in Keurig Green Mountain.
It also only helps that some analysts are seeing acceleration in K-Cup unit sales even before the new brewers roll out. Dougherty noted that unit sales growth had gone from the high single digits earlier in the year to 11.5% during the four weeks ending in mid-June -- before BJ's Wholesale Club and now Harris Teeter struck deals that will be incremental for Keurig Green Mountain.
Sparked by caffeinated growth and a compelling argument to win retailer private labels manufacturing, it's hard to bet against Keurig Green Mountain these days.
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The article Keurig Green Mountain Goes Back to Private School originally appeared on Fool.com.Rick Munarriz owns shares of Keurig Green Mountain. The Motley Fool recommends Keurig Green Mountain. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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