Green Mountain Coffee Roasters

Running Head: FUTURE OF GREEN MOUNTAIN COFFEE

Future of Green Mountain Coffee

Aaron Copeland, Richard Thompson, Katie Ensign, Sara Bullock

Central Washington University?

Future of Brewing

When a small sign was hung on a little cafe in Waitsfield, Vermont in 1981, nobody would have imagined that Green Mountain Coffee Roasters [GMCR] would become one of the world's leading specialty coffee makers. Through hard work, "Demand quickly grew beyond the walls of the café," and many other local companies requested GMCR coffee to offer their customers (GMCR, Company Overview, 2009, p. 1). Today, GMCR "is recognized as a leader in the specialty coffee industry for its award-winning coffees, innovative brewing technology and socially responsible business practices" (GMCR, The Story of Green Mountain, 2009, p. 1). Reaching this point, however, was not easy and forced GMCR to master their marketing strategies in order to survive the competition.

GMCR is doing business in the highly competitive specialty coffee industry where it faces major seller competition, "including Dunkin' Donuts, Peet's and Starbucks" (Datamonitor, 2009, p.36). In addition to this formidable competition, GMCR also has to compete with specialty coffee makers such as Nestle and Gevalia (Datamonitor, 2009). Amidst these competitors, GMCR has still managed to grow successfully over the past few years and has enticed many smaller companies to the specialty coffee industry. These small companies, although negligible alone, could "have an adverse effect on profitability as a result of lower sales" (p.36). All of this competition has created many challenges for GMCR.

One of the largest challenges that GMCR is facing today is its "Dependence on a single supplier" located in China (Datamonitor, 2009, p.35). This creates a problem since the company's supply is "substantially vulnerable to the market condition of the Chinese economy which could result in product supply disruption and cost increment" (p.35). The next challenge GMCR faces is trying to break away from its concentration on the North American market. The concentration of operations in North America "puts the company at a disadvantage compared with its competitors;" many of which have bases of operations on multiple continents (p.35). Although these challenges make GMCR vulnerable to competition, their performance in the market shows they are ready to meet these challenges head-on.

While the competition and challenges that GMCR faces may seem debilitating, they have already surpassed earnings per share [EPS] and revenue expectations this year (Green Mountain Coffee Q1 Tops, 2010). Even more impressive is the speculation that GMCR "probably will continue to enjoy growth in EPS and sales over the next 3 years as it further pervades the U.S. market" (Growth Seen for Green Mountain, 2010, p.1). This should come as no surprise when compared to GMCR's last three years. From 2007 to 2009, net sales and gross profit nearly doubled while net income quadrupled and working capital increased 13 times over (GMCR, Annual Report, 2009). This information shows that GMCR has created an effective marketing mix in order to overcome its challenges and competition.

The driving force behind Green Mountain Coffee Roasters' recent success has been their Keurig single-cup coffee brewers combined with their innovative K-Cups. The K-Cup is a small package that goes in the brewer which contains just the right amount of pre-ground coffees, teas, or cocoas to make a single cup of coffee (or drink). The Keurig coffee brewers are the central product for GMCR since the brewer's consistency and convenience attract new customers for the brewer and the included K-Cup samples attract customers for the coffee. Without the Keurig brewer, GMCR's coffee would have trouble creating an effective value proposition to separate it from the competition. In fact, this brewer is so essential to GMCR's success that controlling supply for these brewers has been the main reason behind most of GMCR's recent vertical acquisitions (Gallo, 2010). This is important because the Keurig coffee brewer currently operates in the "more for more" category of the Possible Value Propositions matrix by offering increased convenience and consistency for a substantially higher price than the competition (Armstrong, 2011). By vertically integrating, GMCR will be able to reduce costs and move closer to the "more for less" category of the Possible Value Propositions matrix. Despite this higher