2. Green Mountain's Morass
Look out below because Green Mountain Coffee (GMCR) is going cliff diving.
Shares of the Keurig machine-maker spilled 8% Monday after grocery store giant Kroger (KR) announced it was planning to launch its own brand of single-serve coffee cups later this year that would compete with the Green Mountain-branded cups. The stock took another half a percent hit Tuesday to just above $21, a 52-week low, on the news that Safeway (SWY) would also be getting into the K-Cup game.Anybody else want to jump into the coffee business while it's hot? Wal-Mart (WMT)? Target (TGT)? Bueller? It;s becoming crystal clear that the single-serve marketplace will quickly become a free-for-all come September when Green Mountain's K-Cup technology reaches the end of its patent cliff. Private labels will pop up, prices will be undercut and hedge fund assassin David Einhorn, who famously shorted the stock, will add another notch on his belt. Yep, from margins shrinking to Einhorn gloating, it's going to be a really rough climb for the folks at Green Mountain from here on out. And it certainly can't be easy for the company since its stock peaked at $116 last September. "We might consider selectively two or three or four possibly private-label brands, store brands, as everybody in the room knows they typically operate with a value to the consumer. However, again we won't do them unless we think that they are profitable," Green Mountain Chief Executive Larry Blanford said at a conference last week. Sorry Larry, but that's not exactly the most inspiring of game plans to turn things around. Even to fool the fools on Wall Street you'll have to think of something way smarter than that. Meanwhile, Green Mountain spokeswoman Suzanne DuLong's isn't infusing much confidence in the company either. In response to Reuters questioning about the increased K-Cup competition, she told the news outlet to check its previous statements about Green Mountain's first-mover advantage and its institutional knowledge about manufacturing K-Cup packs. Sure Suzanne, it's real, real hard to make a packet of coffee. If that's the case, however, why is every green grocer and corner deli getting in the game as we speak? Percolate on that why don't you.
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV