Green Mountain Coffee Gets Boost

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- The single-serve coffee segment is being eyed by many prominent players including Starbucks ( SBUX), Wal-Mart ( WMT) and Sara Lee ( SLE), which have expressed interest in this segment.

Convenience, affordability, ease of usability and high-quality coffee at home are the key drivers behind the growth in the single-serve coffee industry. Green Mountain Coffee Roasters ( GMCR) is a dominant player in the U.S. single-serve coffee market controlling more than three-quarters of the market and around 8% globally.

According to a recent announcement, Starbucks and GMCR have agreed to expand their partnership for the manufacturing, marketing, distribution and sale of Starbucks-branded Vue packs for use in GMCR's recently introduced Keurig Vue Brewer.

In the beginning of the month, Starbucks announced plans to enter the single-serve segment with the launch of its new coffee maker, Verismo. This announcement led to more than 15% drop in GMCR's stock price.

We believe the recent announcement to expand their ongoing relationship will relieve some anxious investors who were wary of Starbucks entry to this segment. Investors reacted positively to this news, with the stock price jumping 10% following the announcement on March 21.

We have a price estimate of $82 for Green Mountain Coffee Roasters, implying a premium to the current market price.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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