Kroger Jumps on the Keurig, er, Kroger-cup Bandwagon
Beaneries nationwide have been scrambling to push the now infamous Keurig-coffee brand, as the single-cup phenomenon has swept the U.S in a gotta-have-it frenzy. Unfortunately for companies such as Starbucks (NASDAQ: SBUX) and Green Mountain Coffee Roasters (NASDAQ: GMCR), brewers will now face increased competition from grocery store shoppers at their local Kroger (NYSE: KR).
The biggest supermarket chain in the U.S. has decided to introduce a single-serve coffee cup product much like Keurig's, except this one will carry the KR brand name. At a time when Americans require high quality coffee to jumpstart their morning, the retailer is entering a highly competitive market that may not embrace the new merchandise with open arms.
According to Reuters, increased single-cup sales have some industry watchers worried about the sustainability of current profit margins. SBUX is set to unveil its K-cup coffee pods tomorrow – months ahead of expectations, while GMCR is still reaping the benefits of tapping in to 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," Piper Jaffray said when discussing GMCR's Consumer Conference.
Sadly for the K-cup pioneer, GMCR's momentum will likely begin to tread down in the near future, as more and more companies are grabbing at the success single coffee cup brewers bring.
Dunkin Brands (NASDAQ: DNKN) recently launched the K-cup system, with analysts believing the company will see stabilized sales after its first year on shelves. However, not all Keurig-cup products are set to garner monetary success, as Caribou Coffee (NASDAQ: CBOU) experienced moderated volumes that slowed growth revenue in months past.
With such grinding competition from those who actually whip up coffee creations on a daily basis, does KR understand what it's getting itself into? As the single-cup category continues to grow, it appears that now is the time to enter the business, if any.
Metaphorically speaking, it's time to let the single-serve games begin!
KR is currently trading at $21.44, down 10.24% year-to-date, while SBUX is trading at $53.37, up 15.95% year-to-date. GMCR is trading at $21.65 today, down 51.86% year-to-date.
For more articles, follow me @KateyStapleton
Latest Ratings for KR
|May 2016||Credit Suisse||Maintains||Neutral|
|May 2016||Piper Jaffray||Initiates Coverage on||Underweight|
|May 2016||SunTrust Robinson Humphrey||Initiates Coverage on||Neutral|
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.