Green Mountain Coffee Roasters (GMCR), the stock-market darling behind Keurig brewing machines, has been hosting its first field day with investors on Tuesday. Shareholders and analysts who made the trip to Boston for the seven-hour pow-wow (or streamed it online) learned a lot of things. Most notably, the company will keep expanding in Southern states and plans to deploy its little one-cup brewing machines to the U.K., South Korea, Mexico, and Sweden.
What they won’t learn, however, is just how many so-called K-cups, little single-serve pods, the company has been selling. Green Mountain stopped sharing that information in 2010, choosing instead to limit its disclosures to percentage changes. K-cups, however, are the crux of its business, and it’s been 12 months since the company lost two of its critical patents on the little pods. The burning question is: How much of the market have competitors grabbed?
Not surprisingly, Wall Street analysts aren’t content with the lack of transparency and have started to come up with their own estimates for K-cup unit sales. A bevvy of market-research firms have done the same. Reporters, meanwhile, have admirably tried to pin the company down on the figure, prompting responses that roughly translate roughly into: “You’re getting warmer.”
It’s clear why Green Mountain stopped publicizing a K-cup count. It didn’t want investors to freak out about the loss of its patent protection. Talking about K-cups a little less paints the company as a more diversified business. The trouble is, it’s not a very diversified business. It still gets roughly three out of every four dollars from the little pods.
At the moment, the position is akin to Ford (F) saying it’s not going to break out vehicle sales because it also makes money from financing. Or Apple (AAPL) declining to talk about iPhone units because it has a few other gadgets as well.
At best, the lack of transparency is a distraction. At worst, it’s a recipe for an extremely volatile stock. Markets, as the old saying goes, hate uncertainty and Green Mountain seems to be openly cultivating uncertainty.
The silence does let Green Mountain maintain a bit of secrecy over its pricing, but with a huge array of products and retail channels, a revenue-per-unit metric would be fairly meaningless.
Meanwhile, the K-cup sales numbers are probably pretty good. Green Mountain’s defense against competition has been to expand geographically and use licensing deals to harness such powerful brands as Snapple (DPS) iced tea and ConAgra’s (CAG) Swiss Miss hot cocoa. The strategy seems to be working. In the recent quarter, Green Mountain’s pod revenue was up 18 percent over the year-earlier period.
Knock-off cups have grabbed only about 8 percent of the market to-date, according to Longbow Research analyst Philip Terpolilli. “They’ve weathered it all fairly well,” Terpolilli says from Boston. “And they had enough of a headstart that they can be the most efficient producer.”