Kroger jumps on single-serve coffee craze T
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Kroger jumps on single-serve coffee craze
The company will introduce a single-serve coffee cup compatible with Green Mountain's Keurig brewer.
By Katey Stapleton , Benzinga Staff Writer
Beaneries nationwide have been scrambling for a piece of the Keurig brewing craze as the single-cup phenomenon has swept the U.S.
Now, grocery stores are getting into the action, giving increased competition to companies such as Starbucks ( SBUX -1.42% ) and Keurig maker Green Mountain Coffee Roasters ( GMCR -7.83% ).
Kroger ( KR -1.02% ), the No. 1 supermarket chain in the U.S., said it will debut its own single-serve coffee cups that work with Keurig brewing machines. Kroger's cups will largely compete with those made by Green Mountain, a threat that sent Green Mountain shares down nearly 8% Monday to close at $21.32.
According to Reuters, increased single-cup sales have some industry watchers worried about the sustainability of current profit margins. Starbucks is set begin selling K-cup coffee pods at its stores Tuesday, months ahead of expectations, while Green Mountain Coffee Roasters is still reaping the benefits of reaching the single-serve market first.
"We maintain that current-quarter expectations are achievable and believe that the company has created brand equity in bringing the most prominent brands to its ecosystem of single-serve platforms," analysts with Piper Jaffray wrote in a June 6 report after seeing a presentation from Green Mountain executives.
Sadly for the K-cup pioneer, the company's momentum will likely begin to slow in the near future as more rivals make plays in the single-cup market.
Dunkin Brands ( DNKN -0.21% ) recently launched a K-cup system, with analysts believing the company will see stabilized sales after the first year on shelves. However, not all Keurig products bring monetary success. Caribou Coffee ( CBOU -6.38% ) experienced moderated volumes and slowing revenue growth after its K-cup debut.
As the single-cup category continues to grow, it appears that now is the time to enter the business. Let the single-serve games begin!
KR closed Monday at $21.35, down 11.85% this year, while SBUX closed at $52.83, up 14.82% this year. Green Mountain Coffee Roasters closed Monday at $21.32, down 52.46% this year.
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