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GreenMountainCoffee Roasters (GMCR) has introduced the latest version of its Keurig brewer called ‘Vue’. The ‘Vue’ Keurig brewers will sell for $249 – twice the price of a traditional Keurig brewer – targeting only the affluent customers.
The new K cup brewers will hit the shelves of ‘Bed, Bath and Beyond’s (BBBY - Analyst Report) stores within a few weeks. The newly launched machine has additional features that can control water pressure, timing and airflow to brew the coffee in different ways and also includes separate dairy froth packs for adding foam. It also allows the customers to control the size and strength of the company's signature single servings.
As per the website, the machine costs about $250 while a 16-pack of Green Mountain breakfast blend coffee Vue capsules costs $12.
Single serve coffee formats were made popular in U.S. by Green Mountain Coffee when it bought Keurig in 2006. It now accounts for about 7.5% of the U.S. retail. The single serve market has been a major growth driver of the overall coffee industry in the U.S.
The Keurig business unit is a pioneer and leading manufacturer of gourmet single-cup brewing systems. K-Cup portion packs for Keurig Single-Cup Brewers are produced by a variety of roasters, including Green Mountain Coffee, Tully's, Timothy's and Diedrich. In fiscal 2011, approximately 84% of the consolidated net sales were attributed to the combination of K-Cup portion packs and Keurig single-cup brewers and related accessories.
Green Mountain Coffee has entered into a few distribution agreements with coffee giants like Dunkin’ Brands Group Inc. (DNKN - Snapshot Report) and Starbucks Corporation (SBUX - Analyst Report), whereby these branded coffees will be available in K-Cup portion packs for use in Green Mountain’s Keurig Single-Cup brewing system. Thus the sheer advantage of having the branded super-premium coffee available for Green Mountain’s brewers comes to the customers with the new relationship. Through these agreements, Green Mountain is aligning with the strongest coffee brands to support a range of consumer choice and taste profiles in Keurig Single-Cup Brewing system.
The launch of Vue brewers comes at an opportune time when the patent enjoyed by Green Mountain for K cups would be nearing its end later this year.
Analysts feel that this will partially defend the competition as the Vue machines will brew only with Vue packs which will not work in other machines.
To begin with, the Vue brewers will brew almost 30 types of Vue packs serving different brands of coffee like Caribou Coffee and Celestial Seasonings; Green Mountain, however, is ready to offer up to 50 varieties by the end of June.
The Vue machines, nonetheless, will face competition from the Kraft Foods Inc.'s Tassimo machines, which brew everything from iced coffee to cappuccino, but come at a much lower price between $100 and $170. The Vermont-based coffee giant’s offering will also come up against Wal-Mart Stores’ (WMT - Analyst Report) planned lower priced brewers.
Green Mountain currently holds a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating. On a long-term basis, we maintain a Neutral recommendation on the stock.