The Keurig-installed base grows at over 5 million brewers annually, Canaccord Genuity's Van Winkle said last month, an attractive growth prospect for Starbucks which has said it intends to make its coffee available in every form consumers want.
Van Winkle said then he expects single-cup coffee sales, including brewing machines and coffee pods, to rise to $4 billion in the U.S. this year.
Richard Haffner, head of global beverage research at Euromonitor, told Reuters that U.S. sales of single-serve coffee pods (excluding brewing machines) grew to $600 million in 2010. Global sales were $4.3 billion last year.
Van Winkle added that "attaching to the new Keurig technology could put Starbucks in a position to expand the range of beverages available, to lead a better solution than is in the market today, and to be the driver of adoption utilizing its stores for distribution.""Keurig is the dominant brand in single-serve coffee with rapidly rising consumer adoption of its brewers seeding a market opportunity that Starbucks can't resist," Van Winkle said. Van Winkle maintained his buy rating and $50 price target on Green Mountain throughout the building anticipation of a deal with Starbucks, and estimated that "earnings-per-share can exceed $1 for each 5% market penetration, with a 25% household penetration looking achievable." JPMorgan analyst John Ivankoe noted in December that "such [a] product will be incremental to Starbucks' store sales and could easily be a $1 billion revenue opportunity for Starbucks in the U.S. alone." Starbucks spokeswoman Lara Wyss likened the coffee company's plans to penetrate the single-cup coffee brewing market to the impact Apple's (AAPL) iPhones had on the smartphone market. -- Written by Miriam Marcus Reimer in New York.
>To contact the writer of this article, click here: Miriam Reimer. >To follow the writer on Twitter, go to http://twitter.com/miriamsmarket. >To submit a news tip, send an email to: firstname.lastname@example.org.
>>See our new stock quote page. Get more stock ideas and investing advice on our sister site, Stockpickr.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV