3 Coffee Stocks That Can Take a Jolt

Updated

Coffee prices have been on a roller-coaster ride for over a year, and, at least for now, they are falling again. However, analysts warn that prices will begin to trend higher soon, due to the Brazilian crop falling short of expectations. Now, an earthquake off the coast of coffee-producing Sumatra has coffee lovers and investors holding their collective breath, wondering if bean prices will skyrocket again.

Will coffee stocks be sent into a tailspin? Probably some will. I decided to take a look at these companies to see which ones have been doing well over the long term, which is always the best indicator of how they will perform in the future. I found three that seem to be having no trouble percolating along, despite the travails of the java market.

The biggest star is, of course, Starbucks (NAS: SBUX) , whose stock value has soared nearly 70% over the past year. The popular coffee vendor has been exercising its marketing muscle, expanding its corporate presence in China, where it plans to triple its current 500 outlets within three years. Additionally, the company is set to expand its bases in Japan, South Korea, Thailand, and Indonesia, while concurrently breaking into markets in Vietnam and India. Closer to home, Starbucks announced its Verismo single-cup coffee dispensing system in early March.


Peet's Coffee & Tea (NAS: PEET) has also shown stellar growth over the past year, despite a slight fourth-quarter disappointment on earnings and revenue, which the company attributed to higher coffee bean prices. The company expects to beat predictions for this year, however, and lower coffee bean prices should help achieve that goal. Peet's is also expanding into the East Coast market, and has added a medium-roast bean to its repertoire, noting that East Coast coffee drinkers prefer that flavor. They will face stiff competition from Dunkin' Brands (NAS: DNKN) , though, which has firmly cemented itself as the go-to coffee chain for the region.

Caribou Coffee (NAS: CBOU) has seen its stock value rise almost 75% over the past year, and Morningstar recently noted that the number of its single-cup coffee products sold at food markets has increased 86% in the first quarter. If coffee beans remain cheap, margins should expand as well. Caribou is also getting jiggy with its esoterically flavored coffees, offering two new varieties to reawaken coffee lovers' taste buds.

Fool's take
Though it looks as if coffee prices will decrease only temporarily, these companies stand to increase profits as long as they maintain any price increases that they implemented when bean prices were higher. Even if the recent earthquake disrupts the coffee market for a short time, these three companies have shown that they can make good over the long term, which is just the flavor that most investors enjoy most of all.

Have you ever wondered, while sipping that steaming cup of specialty joe, just which companies are currently poised to take the best advantage of emerging markets? If so, then take a look at this free report today!

At the time thisarticle was published Fool contributorAmanda Alixowns no shares in the companies mentioned above.The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of and writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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