Kroger jumps on single-serve coffee craze

The company will introduce a single-serve coffee cup compatible with Green Mountain's Keurig brewer.

By Benzinga Jun 11, 2012 5:08PM
Image: Coffee Woman (© Bloomimage/Corbis)By Katey Stapleton, Benzinga Staff Writer

Beaneries nationwide have been scrambling for a piece of the Keurig brewing craze as the single-cup phenomenon has swept the U.S.


Now, grocery stores are getting into the action, giving increased competition to companies such as Starbucks (SBUX) and Keurig maker Green Mountain Coffee Roasters (GMCR).


Kroger (KR), the No. 1 supermarket chain in the U.S., said it will debut its own single-serve coffee cups that work with Keurig brewing machines. Kroger's cups will largely compete with those made by Green Mountain, a threat that sent Green Mountain shares down nearly 8% Monday to close at $21.32.


According to Reuters, increased single-cup sales have some industry watchers worried about the sustainability of current profit margins. Starbucks is set begin selling K-cup coffee pods at its stores Tuesday, months ahead of expectations, while Green Mountain Coffee Roasters is still reaping the benefits of reaching the single-serve market first.


"We maintain that current-quarter expectations are achievable and believe that the company has created brand equity in bringing the most prominent brands to its ecosystem of single-serve platforms," analysts with Piper Jaffray wrote in a June 6 report after seeing a presentation from Green Mountain executives.


Sadly for the K-cup pioneer, the company's momentum will likely begin to slow in the near future as more rivals make plays in the single-cup market.


Dunkin Brands (DNKN) recently launched a K-cup system, with analysts believing the company will see stabilized sales after the first year on shelves. However, not all Keurig products bring monetary success. Caribou Coffee (CBOU) experienced moderated volumes and slowing revenue growth after its K-cup debut.


As the single-cup category continues to grow, it appears that now is the time to enter the business. Let the single-serve games begin!


KR closed Monday at $21.35, down 11.85% this year, while SBUX closed at $52.83, up 14.82% this year. Green Mountain Coffee Roasters closed Monday at $21.32, down 52.46% this year.


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