The Verismo Is Here, and Here’s Why GMCR Should Be Worried
Word on the street is that Starbucks (NASDAQ:SBUX) may spell the death of Green Mountain Coffee Roasters (NASDAQ:GMCR). The patents on the Vermont-based coffee roaster’s single-cup Keurig system have expired, and Starbucks has been quick to swoop in with its Verismo machine already topping company forecasts.
“It really exceeded our expectations,” said Starbucks spokeswoman Alisa Martinez.
Despite Starbucks CEO Howard Schultz claiming that the relationship between the two companies will remain intact, many investors feel otherwise. GMCR shares plummeted in March when the machine was initially announced, and have lost 44.57 percent of their value this year. The company makeS coffee pods for Starbucks and Dunkin Donuts (NASDAQ:DNKN), but with the patent expired it seems likely that the two coffee outlets will find a way to become independent.
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Schultz has drawn a distinction between the type of consumer who would buy the $199 and up latte-producing Verismo, and those who only want a brewed coffee machine. It’s possible that Keurig and GMCR will remain the morning companion of choice for brewed coffee drinkers, but as some are quick to note, Starbucks looks unstoppable. The company makes up 29 percent of the United States coffee market, has $2.5 billion in cash, boasted a profit margin of 56 percent in 2011, and has a market cap of $38 billion. GMCR is about a tenth of the size.
Starbucks is also aligning its already powerful brand image with the even more powerful brand image of Apple (NASDAQ:AAPL), as rumor has it that the company will support Passbook, a type of digital wallet pre-loaded into the iPhone 5.