The heat is on in the single-serve coffee brewer business. Longtime industry leader Keurig, and its parent company Green Mountain Coffee Roasters (NASDAQ:GMCR), is facing increased competition as multiple companies are set to launch a new wave of single-serve machines.
The in-home single-cup coffee maker, once considered a luxury item reserved for offices and wealthy households, is becoming more and more popular thanks to the availability of cheaper machines and the proliferation of drink varieties. Sales of coffee brewing machines are expected to reach $34.6 billion this year, and sales of the single-serve pods many of them utilize should jump 32 percent to $959.1 million.
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Bunn, maker of commercial beverage equipment, has announced its plans to introduce a version of the single-serve coffee brewer called MyCafe. Although it does not have the necessary licensing, the machine will be compatible with Keurig’s popular K-Cup cartridges.
Keurig will also have to contend with Wal-Mart’s (NYSE:WMT) new machine made by Esio Beverage Co. that will give consumers the power to brew both hot and cold drinks. Wal-Mart has plans to roll out the new machine in two-thirds of its retail stores later this month.
Green Mountain says that despite the heightened competition it fully expects to remain on top.
“Since the early days of single-serve coffee, we have successfully competed against well-resourced companies like Mars and Kraft (NASDAQ:KRFT), many of which offered systems of brewers and beverages,” said company spokesperson Suzanne DuLong.
The company has faith that its product quality, customer loyalty and impressive 30-brand range of drink options will keep it firmly in the lead of the fast-growing retail market. Keurig has single-cup marketing agreements with coffee powerhouses like Starbucks (NASDAQ:SBUX), Dunkin’ Brands (NASDAQ:DNKN) and Caribou Coffee (NASDAQ:CBOU).
However, despite Green Mountain’s confidence in the face of new levels of competition, their investors will likely need more convincing. Company stock is down almost 80 percent from last year’s high, due in part to shareholder concerns over growth potential and questionable accounting practices.
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