Green Mountain Coffee Roasters (NASDAQ:GMCR) is going to lose protection on two patents key to their best-selling K-Cups by September 2012. These key patents relate to technology that maintains a precise amount of coffee in each pod and the means to extract its liquid.
K-Cups are coffee pods that work with Keurig coffee brewing machines. GMCR bought out Keurig in 2006. Sales have risen 65% on average a year, and currently GMCR has a 71% market share in the U.S. for single-serve beverages. GMCR has tie-ups with big coffee names such as Caribou (NASDAQ:CBOU), Folgers (NYSE:SJM), Starbucks (NASDAQ:SBUX) and Dunkin’ (NASDAQ:DNKN).
The loss of the patents could mean competition in GMCR’s core business. “Copying the technology won’t be difficult once the patents expire”, said Mark Rygiel, a patent attorney at Sterne, Kessler, Goldstein & Fox in Washington. “The K-Cup is not a complex invention,” he said. Most potential rivals “would understand what’s going on.”
Competitors, however, are already emerging. Rogers Family Co., a private coffee roaster and distributor, sells one-cup coffee pods compatible with Keurig brewers that retail at $6.99 for a 12-pack. Green Mountain’s 24-pack of namesake brand K-Cups sell for $16.49 on its website. Rogers was sued recently by GMCR, so obviously protecting its turf is important.
There are conflicting opinions on the real impact of the expiring patents on GMCR. The stock has been on a roller-coaster this year, with a particularly nasty fall after the company declared its worse than expected Q4 results.