Is Green Mountain Coffee Roasters Set to Grow in 2013?

New data compiled by The NPD Group revealed a trend in coffee drinking habits that bodes well for Green Mountain Coffee Roasters (NASDAQ:GMCR). Based upon coffee drinking habits in the United Kingdom, the firm released a chart that showed a distinct difference between the growth rates of the traditional coffee sector and the specialty coffee sector.

Since 2008, traditional coffee, also known as “drip” coffee, has lost close to half its share of the food service purchases market, while the market share of specialty coffee has grown to 12 percent. This trend indicates that Green Mountain, with its Keurig single-cup brewing system no longer under patent, has room to grow despite increasing competition from Kraft Foods’ (NASDAQ:KRFT) brewing system and Starbucks’ (NASDAQ:SBUX) Verismo.

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While the data is limited in scope, the trend is an important one because, as a group, the British drink coffee at restaurants more often than the French or Americans; for the past five years, coffee has consistently accounted for 15 percent to 20 percent of all purchases of prepared meals, snacks, and drinks in the United Kingdom…

Typically, changes in the food service market occur “glacially,” according to NPD Chief Industry Analyst Harry Balzer, and shifts in industry trends are often attributed simply to changes in customer behavior. However, NPD’s analysts argue that the growth in spending at quick service coffee outlets has prompted a growth in the number of stores. Meaning that “the quick service coffee chain segment is successful BECAUSE of the demand for coffee, not a cause of it.”

This trend is consistent with the assessment of Green Mountain Coffee Roasters made by Argus in its upgrade of the company’s shares earlier this week. “Despite moderating growth, management expects the number of brewers sold to nearly triple over the next three and a half years, and estimates that the market for single-cup brewing equipment could reach 35 million units by 2016,” wrote analyst John Staszak in a research note seen by 24/7 Wall St.

With a forecast for growth, the United Kingdom’s coffee drinking habits are good news for Green Mountain, but also likely for competitors. The rapidly growing market is ravenous, and Kraft and Starbucks both have worthy products that, even if they play second and third fiddle to Green Mountain’s Keurig products, will still likely see increased sales in the U.K. market.

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