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Keurig Green Mountain, Inc. Message Board

  • tigerpac tigerpac Sep 22, 2011 12:51 PM Flag

    Detwiler Fenton: Clogged Channels?

    Coming across my schwab.com news feed....

    Bad News for Green Mountain (GMCR) as Clogged Channels, K-Cup Cannibalization Loom

    Retail research firm Detwiler Fenton reports that some channels will likely see delays in receiving Starbucks (Nasdaq: SBUX) K-Cups, with some getting the product as late as June of 2012. Larger grocery chains and accounts such as Bed, Bath, & Beyond (Nasdaq: BBBY) will most likely not see any delays.

    Starbucks k-cups currently look to have a 4 month delay.

    This is not the only bad news for Green Mountain Coffee. Janney Capital announced it is forecasting 90% of it's Dunkin Brand k-cup sales will come from existing users and will ultimately cannibalize other k-cup brand sales. The firm also states that Keurig sales growth will not be driven by DNKN sales until 2012.

    An analyst at Janney estimates that GMCR will sell 254 to 756 million DNKN units annually, which currently makes up 2 -10 percent of total k-cup sales.

    Note: I had to type most of the above since it's available yet to cut and paste so there may be slight differences when the article becomes widely available.



    This is the same research firm that put out this note about GMCR and Walmart...note the date...

    http://www.theflyonthewall.com/permalinks/entry.php/GMCR;WMTid1423787/GMCR;WMT-Green-Mountain-trends-at-WalMart-hitting-turbulence-says-Detwiler-Fenton

    To me, the big box stores were always mentioned as getting the Starbucks product first. Clogged channels is really a misnomer here.

    Not sure what to make of the alledged Janney k-cup sales estimates...one can extrapolate the total k-cup units being sold I guess if one assumes these numbers are correct. And since we don't get those numbers from GMCR anymore....

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    • TP:

      I think GMCR provides the standard and required information, but I do find it odd that it has ceased to provide information like KCup sales. I do understand that I am driving at some sensitive margin information, but analysts absolutely should demand more specificity (a relative bound would not compromise competitive info).

      But, I do agree that if the analysts let me avoid providing any detail whatsoever, I would see no advantage to providing detail...

    • Tech,

      If you read the 10-Q's and listen and/or read the conference call transcripts, Ithink you would agree that GMCR provides a SIGNIFICANT amount of information to it's shareholders.

      There are some metrics that they have chosen not to provide because they feel that it gives their competitors insight into the workings of the company that took them so long to build. Kind of like trade secrets. The fact that it happens to be the metrics that you are looking for troubles you but if you were in their shoes, you would probably be doing the same thing. I don't think they are deceiving anyone.

      Even when Herb Greenberg was on their case, GMCR's PR person, Suzanne DeLong cordially answered every question he threw at her. If she did not know the answer, she found out and got back to Herb. It's just the type of organization Green Mountain is.

    • I want to thank you and congratulate you TP. You have shown class and intellectual honesty in our exchanges. I know longs don't like my POV. Despite what TF and others think, I am trying to do the right thing here.

      Good night...

    • TP:

      Obviously, I am very skeptical. I'll be the first to admit it. But, he refers to sales rather than earnings. He refers to future business model rather than benchmarking to anything measurable, concrete and specific. Yet, he says that GMCR will continue to drive to GMCR branded/owned, which implicitly says GMCR makes more from that.

      At some point, people have to drive to real answers. GMCR already stopped reporting KCup sales. I had to look at gross revenue per installed system per quarter to get a relevant metric (which is stable and not growing). There's a part of me that wonders if they are going to stop reporting Keurig machine sales. I suspect the analysts are going to start asking harder and more specific questions moving forward so that this kind of response doesn't hold water. I would certainly have asked for clarification (e.g. if SBUX KCups replaced 100% of GMCR KCup sales, you would be indifferent? It would not materially affect earnings?). They should be if the are recommending someone buy a stock trading at 100 times trailing earnings...

    • TP:

      Thanks for the repost. That's what Salt posted before. I just think one can drive a truck through "going forward we expect to be fairly indifferent". He might be factoring in lower margin in the future so that SBUX and DNKN are indifferent to the long term profit of GMCR KCups but lower than the current profit. That's actually my hypothesis. If so, cannibalization is significant in the near term, it will reduce profit growth. We'll see. But, I would like specific concrete and clear comparisons rather than future relative indifference...

      Thanks again. I appreciate your posts.

    • Tech,

      This was Larry Blanford's comment during the Q311 conference call in regards to Starbucks and Dunkin:

      In addition to expanding consumer choice in the system, we believe these relationships fuel new excitement for Keurig owners and users, raise system awareness and of course, attract new consumers to the system. The rolling out of these brands into our system has been planned and executed in a thoughtful and deliberate manner and is factored into our 2012 guidance.

      As we said previously, while we do not expect to disclose the financial terms associated with these relationships, we can say that the high level economics are such that going forward we expect our business model will be fairly indifferent to sales of GMCR branded versus partner branded portion packs. That said, we will of course, continue to work to drive sales of our flagship brand and new beverage products within the system.

      TP

    • GMCR in process of building new facilities to handle all of the business.

      If there was a major problem than the stock price imo would show it.

      Dow off 700 points since yesterday afternoon. Thus whatever GMCR if off is just market related imo

    • TP- Detwiller Fenton's term "clogged" actually means "can't keep up with demand, even though roasting & k-cup lines are running 24/7"..

      GMCR has been allocating for a couple years now...their best old customers like BBBY & Costco will see product first...on top of that GMCR is building holiday inventory now

      IMO all other info. by Detwiller Fenton is "anecdotal" since they surely didn't get it from GMCR. SBUX or Dunkin'.

      IMO this "anecdotal" info. was compiled from cruising the stores, making personal observations & talking to floor personnel....just like many posters on this board do.

      They state their info. as hard fact when it is not...it is just their opinion.

      Dunkin' is barely on the shelves & SBUX is not, yet they cite "cannibilization"....don't think so....we'll know the facts within a couple months..

      • 2 Replies to carefreehighway00
      • As opposed to your opinion.... I'll take DF... Finally, someone is being intellectually honest and critical...

        It simply stands to reason that most demand for SBUX and DNKN will be cannibalization as opposed to new consumption. Those that have Keurig machines and use them are more likely to buy DNKN/SBUX Kcups than those that have not bought Keurig machines. As a result, most of the sales will simply displace GMCR branded KCups and while GMCR may say that it is largely indifferent (I forget the exact langauge) between GMCR and SBUX branded sales, it id EXTRAORDINARILY unlikely that it is making more on DNKN/SBUX. So, logically speaking, if most sales are cannibalized and it makes less profit per KCup (we don't know how much less), it is NOT a good thing for near term earnings. So, you simply have to be willing to take on faith that GMCR will be unaffected by the macro environmnet, by the patent expiration, by the lower margins from DNKN/SBUX...

      • I agree..it ties in with GMCR's own job postings for second and third shift jobs.

        <TP- Detwiller Fenton's term "clogged" actually means "can't keep up with demand, even though roasting & k-cup lines are running 24/7"..>

        Agree again...this is well known by longs on the board.

        <GMCR has been allocating for a couple years now...their best old customers like BBBY & Costco will see product first...on top of that GMCR is building holiday inventory now>

        Just a guess that the DF analyst came from Janney and still has access to certain Janney info.

        <IMO all other info. by Detwiller Fenton is "anecdotal" since they surely didn't get it from GMCR. SBUX or Dunkin'.

        IMO this "anecdotal" info. was compiled from cruising the stores, making personal observations & talking to floor personnel....just like many posters on this board do.

        They state their info. as hard fact when it is not...it is just their opinion.>

        Folgers hasn't reported any cannibalization from their brand.

        <Dunkin' is barely on the shelves & SBUX is not, yet they cite "cannibilization"....don't think so....we'll know the facts within a couple months..>

    • Thanks TP. I appreciate the post. I hadn't seen this...

 
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