gmcr
TRANSCRIPT
![Page 1: GMCR](https://reader035.vdocuments.us/reader035/viewer/2022071703/55a2acb51a28abb1568b46fe/html5/thumbnails/1.jpg)
Siddharth Das
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Investment Thesis
GMCR is a market leader in a growing
consumer industry
Great potential for growth and
innovation
Over 30% short interest, allowing for a
potential short squeeze
Worries over competition driving down
margins are overestimated
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Industry Overview
Coffee consumption is increasing (78%
to 83% in one year) along with single
cup coffee consumption (8% to 13% in
one year)
24% owned a brewer in 2012, 36% in
2013
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Company Overview
Operates in the US and Canada
GMCR is the leader in single-cup coffee
with 13% market share of total coffee
consumption in the US
Sold 8.3 billion portion packs, compared
to 6.6 billion last year (26% increase)
Strengths in loyalty, diversity, and
brands
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Business Model
Operates on a razor/razor blade model
Sells brewing machines (razor) at low
margin
Sells K-cups (razor blade) at high margins
22% growth in portion packs
Has wholesale customer accounts in
supermarkets, convenience
stores, hotels, restaurants, universities,
and offices
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Great Brands (48)
Caribou Coffee
Dunkin’ Donuts
Eight O’Clock
Good Earth
Kirkland Signature
Lipton
Orient Express
Promenade
Seattle’s Best
Coffee
Snapple
Starbucks
Swiss Miss
Tazo
Tully’s
Vitamin Burst
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Numbers
Price: $69.04
52 Week Range: 27.88 – 89.66
Market Cap: 10.98B
Daily Volume: 4.6M
Debt to Equity: 12.7%
EV/EBITDA: 9.42
Yield: 1.45%
Beta: 0.90
P/E
GMCR Industry
Average
S&P
500
20.84 21.27 19.69
1 Year 3 Year 5
Year
9 Year
Net Margin 9.40 7.61 6.85 5.89
% ROE 17.38 15.04 15.82 15.90
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Chart
Acquired
Van Houtte
Announced
SBUX Deal
David
Einhorn
Shorts
Missed
estimates
Drop in K-
cup demand
Renews
SBUX deal
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Recent Updates
Announced a $1 billion share buyback
program
Announced $1.00 annual dividend, paid
quarterly
16% revenue growth for year; 22% for
quarter
FCF grew from $77 million last year to
$603 million, projected $200-$300 for
next year
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Looking Ahead
Upgrading to Keurig 2.0 within a year
Expanding into cold products (carbonated,
sparkling, and still) with new technology
Launching in UK, Australia, South Korea,
and Sweden in 2014
Looking to grow in work (10%), hospitality
(5%), and food (1%) locations
Expanding into soup and hot cereal
Locked in 100% of coffee beans for 2014
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Management
CEO Brian Kelley
Consistently beats estimates
Management holds 11% of equity
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Risks
Decreased sale of Keurig Brewing
Systems from competition
Shifting preferences for coffee
SEC looking into accounting practices
Increased competition after patent on K-
cups expired September 2013
Price of Arabica coffee beans
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Conclusion
Coffee consumption and single cup
coffee is increasing
Undervalued due to overestimation of
competitors
Float short allows for a potential short
squeeze
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Appendix
10-K
The Street (Nov. 17)
S&P Capital IQ (Nov. 21)
National Coffee Association