Wake Up and Smell the K-Cup!

Where's Major Dickason when you need him?

Shares of Peet's Coffee & Tea (NAS: PEET) took a nosedive Tuesday, triggered by Dunkin' Brands (NAS: DNKN) and its highly dilutive secondary stock sale. Yeah, I know, that's like selling your car because your bike has a flat tire -- there's no reasonable cause-and-effect action going on.

But the dive went even deeper on Wednesday after Peet's reported its own results. Taken together, it adds up to an 11% two-day drop.

Flat year-over-year earnings on 14% higher sales in the third quarter was better than the average Street projection, but early guidance for the 2012 fiscal year came in a bit light. Management sees sales rising about 10% next year, driving earnings about 20% higher.

Results like that would simply extend the current growth rates for another year -- and Peet's is already a relative laggard in the coffee industry. Its 8.4% annual sales growth on a trailing basis is slightly behind the respective 9%, 12%, and 10% boosts seen by rivals Caribou Coffee (NAS: CBOU) , Starbucks (NAS: SBUX) , and Krispy Kreme Doughnuts (NYS: KKD) . And then you have Keurig K-Cup owner Green Mountain Coffee Roasters (NAS: GMCR) nearly doubling its yearly sales. Peet's just can't compete with numbers like that.

And the K-Cup is the not-so-secret weapon in this race. Peet's hasn't jumped on that bandwagon yet and seems to be leaving money on the table as a result.

What's worse is that the company doesn't seem to have any plans on joining the K-Cup crowd. The brand never came up in last night's analyst call; instead, Peet's hopes to drive sales with "a pipeline full of new, seasonally relevant flavors" throughout the year.

If you want to give Peet's management the benefit of the doubt, the Keurig craze just might turn out to be a fad after all. A long-lived fad, but still one destined to fade the same way I expect SodaStream International (NAS: SODA) to fall by the wayside. And in that case, staying out of that market would make Peet's look smart.

But even then, I'd imagine that the company would recoup the investment in getting a K-Cup line up and running long before the machine goes out of favor. Personally, I don't see a good reason not to do K-Cups right now.

Will Peet's ever wake up and smell the K-Cup, or will the company keep waiting for Major Dickason's charge that never comes? The only way to know for sure is to keep close tabs on the company. Our Foolish watchlist feature helps you do exactly that, and can even keep an eye on the entire coffee industry on your behalf:

At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of SodaStream International, Starbucks, and Green Mountain Coffee Roasters; and creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.