Keurig brews strong growth for Green Mountain

* Single-cup brewing gaining popularity in United States

* Keurig likely to up share to 15 pct by next year

BANGALORE, Aug 18 (Reuters) - Green Mountain Coffee Roasters Inc's GMCR.O Keurig brewers, which have been posting recession-defying growth rates, are likely to double their share of the coffee brewer market in the United States next year, as single-cup brewing gains popularity.

As coffee lovers seek faster and more convenient ways to get their daily dose of caffeine, they are increasingly turning to single-cup brewers, which offer some of the variety of brews available at a coffee shop at home.

“(Single-cup brewing) is the hot consumer trend in coffee and it is not going to be broken by the economic environment,” Canaccord Adams analyst Scott Van Winkle said.

Sales of single-cup brewers rose 65 percent to $28.8 billion in 2008 from the previous year, according to estimates by market research firm NPD Group.

Green Mountain, whose shares have more than doubled over the past six months, has been the biggest beneficiary of this trend with its Keurig single-cup brewer systems.

In Green Mountain’s third quarter, Keurig accounted for about 7 percent to 7.5 percent of all coffee brewers sold in the United States, according to analysts.

Janney Montgomery Scott’s Mitchell Pinheiro said assuming that there are 18 million brewers sold annually, he sees Keurig taking about 12 percent share of new brewer sales by September, and about 18 percent by the same time next year.

Canaccord’s Van Winkle estimates that Keurig will expand its share to “something approaching” 15 percent of all new brewers sold in 2010, but added that “they could possibly do 15 percent even this holiday season.”


In its third quarter ended June 27, the company shipped 439,000 Keurig brewers -- a nearly three-fold rise from the year-ago period -- after more than doubling sales in the first two quarters.

“Today’s growth rates of Keurig are a reflection of consumers being more comfortable with the value proposition of the Keurig brewers,” Janney Montgomery Scott’s Pinheiro said.

Green Mountain sells Keurig brewers at breakeven prices to retailers, and makes a profit on sales of the higher-margin K-cup portion pack refills. Keurig brewers, which also make tea and hot chocolate, retail for about $90 to $250.

Pinheiro said Keurig’s growth has also been helped by increased distribution in the retail network, and by Green Mountain’s effective marketing efforts, such as in-store demonstrations and television advertisements.

Keurig brewers are sold at various retailers such as Costco Wholesale Corp COST.O, Bed Bath & Beyond Inc BBBY.O, and at Macy's and Bloomingdale's stores.

Green Mountain, which also sells to hotels and offices, entered into a deal in late April to sell its brewing systems in over 3,000 Walmart stores.

Since Keurig is widely used in offices, it benefits from word-of-mouth publicity, Van Winkle said.

“About 7 percent to 10 percent of office coffee goes through a Keurig machine, so you have a lot more sampling.

“It’s used in hotels, auto dealerships and doctors’ offices. It has a much broader customer base which makes it easier to sell,” he said.


Analysts say that Keurig's growth is unlikely to be threatened by other single-cup machines, which include Senseo systems from Philips PHG.AS and Sara Lee SLE.N, Mars Inc's Flavia systems and Kraft Foods Inc's KFT.N Tassimo brewers.

“Their (single-cup) competitors are not present in all three segments -- homes, offices and hotels -- in a traditional sense, meaning there aren’t office distributors out there selling Tassimo or Senseo machines,” Van Winkle said.

“Flavia doesn’t have a home product (and) Senseo, which was earlier a good player in the home market, is basically non-existent now.”

Pinheiro said Keurig’s end product seemed to be superior, and brewed faster, than its single-cup competitors.

In June, Jarden Corp JAH.N and privately held Conair Corp, whose respective brands Mr. Coffee and Cuisinart dominate the home brewer market, signed deals with Green Mountain to make their brewers compatible with K-Cup portion packs.

“It’s game over for the others. Keurig is the industry standard,” Canaccord’s Van Winkle said.

(Editing by Anne Pallivathuckal)

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