2 Trends Coffee Investors Need to Watch


This video is part of our "Motley Fool Conversations" series, in which consumer goods editor and analyst Austin Smith and industrials editor and analyst Brendan Byrnes discuss topics across the investing world.

Coffee is one of the most traded commodities in the world, so when big trends come along that shake the dynamics of this industry, investors need to tune in. The two biggest trends to be aware of right now are single-serve brews and falling commodity prices.

The former was brought to its current zenith by Vermont-based brewer Green Mountain Coffee Roasters, and it's not done growing. 35% of single-serve brewers were sold in the past six months. Unfortunately for Green Mountain, the party may be over as other companies are starting to come out with their own comparable devices, specifically frienemy Starbucks (Nasdaq: SBUX) .

The other must-watch trend is falling Arabica coffee prices. Arabica is the higher-quality, more expensive bean compared with robusta beans. This creates opportunity for expanding margins or lower end-prices for coffee brewers. Starbucks likely stands to benefit the most, as it was able to successfully pass along higher prices when Arabica beans recently became more expensive and can now realize higher margins as it maintains those higher price points.

Coffee stocks have usually a boom or bust for investors recently, with companies like Green Mountain Coffee falling sharply and Starbucks rising to new highs. Despite all the opportunity in this space, it can be hard to identify the real winners. That's just the opposite for "The Motley Fool's Top Stock for 2012." We've created a special free report for investors to uncover this soon-to-be rock star. The report highlights a company that is revolutionizing commerce in Latin America, and you can get instant access to the name of this company by clicking here to download it now.

At the time thisarticle was published

Austin Smith owns shares of McDonald's. Brendan Byrnes has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks.Motley Fool newsletter services recommendGreen Mountain Coffee Roasters, McDonald's, and Starbucks. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.