Green Mountain K-Cup office sales slowing: report

Thu Jun 14, 2012 4:41pm EDT

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(Reuters) - Green Mountain Coffee Roasters Inc (GMCR.O) had a "noticeable slowdown" in sales of K-Cup coffee pods to U.S. offices in May, a research report showed on Thursday, and its shares fell more than 5 percent to a new low.

Boston-based research firm Detwiler Fenton said sales growth is typically expected to ease in June and rebound in August. This year's earlier-than-expected slowdown is causing some distributors to revisit their autumn outlook and look at alternatives, it said, notably single-serve cups compatible with Green Mountain's Keurig machines which are not licensed by Green Mountain.

A Green Mountain spokeswoman did not immediately return a call seeking comment.

The report came just as Green Mountain is facing more competition at retail stores, including from manufacturers making cups compatible with Keurig machines without paying Green Mountain licensing fees.

One such manufacturer is California-based Rogers Family Co, which is making cups for U.S. supermarket chain Safeway Inc (SWY.N).

Rogers already sells its San Francisco Bay OneCup at locations including Costco Wholesale Corp (COST.O). It is already being sued for patent infringement by Green Mountain.

Late on Friday, Kroger Co (KR.N), the largest U.S. grocery chain, told Reuters that it would soon sell Keurig-compatible coffee cups. The company declined at the time to say whether the cups would be made in cooperation with Green Mountain or independently.

The report pointed out that as more competitors enter the K-Cup market, space on grocery shelves will get tighter. That could lead "slotting fees," or what vendors pay for shelf access, to go up, it said.

According to Thursday's report, Detwiler has heard that some unlicensed manufacturers have locked in orders with existing office clients of Green Mountain.

Office coffee services, which helped drive Green Mountain's early popularity, accounts for about 10 percent of the company's sales, the report said.

Green Mountain shares fell $1.18, or 5.5 percent, to $20.13 on Nasdaq.

(Reporting By Martinne Geller and Melvin Backman in New York; Editing by David Gregorio, Marguerita Choy and Richard Chang)

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