Green Mountain Coffee Roasters Inc. (GMCR) recently removed two senior members from their positions in the Board of Directors due to the violation of internal policies.
Robert Stiller, the company’s founder and chairman, along with lead director William Davis were removed from their respective positions. These board members were sacked after they sold their shares for margin calls when the trading window was closed as per the company’s internal trading policy.
According to the company, Stiller sold 5 million shares to cover margin calls and William Davis sold 4,00,000 shares on May 4, 2012, and another 148,000 on May 7, 2012 when the trading window was closed due to the company’s internal trading policy.
Following the reorganization of the management, the company has now appointed Michael J. Mardy, who was formerly the head of the board’s audit and finance committee, as interim chairman.
Robert P. Stiller founded Green Mountain in 1981 and served as its President and Chief Executive Officer until May 2007, after which he was the company’s Chairman of the Board of Directors until May 2012.
William D. Davis was the President and Chief Executive Officer, and a Director from July 2002 until September 2010.
After the sell-off, Stiller holds 1,857,031 million shares, and Davis holds 36,598 shares of Green Mountain stock.
Green Mountain Coffee Roasters is a growing company in an industry that is expanding fast. The premium coffee industry has experienced strong growth over the past decade and the company is targeting the growing consumer demand for the coffee experience.
Moreover, management’s core business model involves the implementation of a multi-channel geographic penetration strategy, which entails expanding distribution through multiple channels and through geographic expansion. The use of multiple distribution channels increases the presence of the company’s coffees.
However, Green Mountain revenue is highly dependent on one-cup Keurig brew systems and the coffee K-Cup packages that go in them. However, eventually when the demand for brew systems will slow down and the explosive growth seen in 2011 will cease.
Moreover, the main patents on the K-Cup will end in September of 2012. Well-known brands and close competitors like Starbucks (SBUX) and Caribou Coffee Roasters (CBOU) will have other alternatives, which would hurt the company’s fundamentals.
Currently, Green Mountain holds a Zacks #4 Rank, which translates into a short-term Sell rating. Over the long term, we prefer to rate the stock as Neutral.
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