Wall Street is mad about coffee pods

August 25, 2014
August 25, 2014

Say what you like about their quality, taste and environmental inefficiency, but coffee pods are taking America by storm. And Wall Street is not immune to their charms, apparently.

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Keurig Green Mountain is, at the time of writing, the best-performing stock on the Standard & Poor’s 500 Index in 2014. Its share price has soared by nearly 78% this year.

The surge is partly a reflection of ravenous consumer appetite for pod-derived coffee in general, and Keurig’s machines and pods in particular. According to Euromonitor, Green Mountain grabbed a 19.4% share of the US retail coffee market last year, up from basically zero in 2004.

Lucrative licensing deals are another factor: Last week the company secured an agreement with Kraft Foods, enabling it to exclusively produce pods for brands such as Maxwell House and McCafe.

And arguably the biggest reason for strength in the stock is Keurig’s increasingly close relationship Coca-Cola. In February, the iconic beverage giant took a 10% equity stake in Keurig (which it has since lifted to 16%). The two companies are collaborating on instant carbonated beverages for consumption at home (Coke pods!).

Only a couple of years ago, Green Mountain was being circled by short sellers amid allegations of accounting irregularities.  Its fortunes have evidently improved rather dramatically since then, which must be a smooth taste for its shareholders.

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