Keurig Green Mountain Inc (NASDAQ:GMCR) is up more than 14% in trading today after announcing a licensing, manufacturing, and distribution deal with Kraft Foods Group, Inc. (NASDAQ:KRFT) including Maxwell House and other major brands. While the financial terms of the deal weren’t disclosed, this should strengthen Keurig Green Mountain’s sales by giving customers even more brand name coffees to choose from.
As a closed system, expanding K-Cup brands makes the product more appealing
While Keurig Green Mountain Inc (NASDAQ:GMCR) has commercial product lines, it’s probably best known for its K-Cup Single Cup Brewers that take a specially designed cartridge and consistently produce the same cup of coffee without the user having to do much of anything. While that’s great for people who have found a brand that they like, it also locks people into the Keurig catalog of options so expanding those options should make the whole proposition more appealing.
“Consumers consistently choose the Keurig brewing system for the quality, simplicity, value, and, most importantly, the variety of brands and beverages available in the system,” said Keurig Green Mountain Inc (NASDAQ:GMCR) CEO Brian Kelley. “Adding Kraft’s celebrated brands to the licensed Keurig family means Keurig consumers will be able to enjoy even more beverages they know and love.”
Keurig Green Mountain Inc (NASDAQ:GMCR) will start producing its K-Cup, K-Carafe, and Keurig Bolt packs for Maxwell House, Gevalia, Yuban, and McCafe (for those who wish they could have McDonald’s coffee at home) sometime this fall. Keurig Green Mountain now produces coffee packs for more than 50 different brand name coffees.
Kelley hinted at Keurig Green Mountain – Kraft deal earlier this month
Keurig Green Mountain Inc (NASDAQ:GMCR)’s stock price slid earlier this month when revenue growth failed to meet the market’s expectations, even though earnings per share jumped from $0.76 to $0.94 year-on-year, closing at $113.20. The stock had already started to recover, but today’s announcement has pushed it to the highest point in the company’s history.
Kelley actually hinted that there was something in the works, though it was probably dismissed at the time as typical earnings-period PR, when he told investors that “We also are excited about the imminent launch of our new Keurig 2.0 hot platform; the addition of formerly unlicensed and new brands to the Keurig Green Mountain Inc (NASDAQ:GMCR) hot beverage system during the quarter.”
Next time we will have to pay closer attention to the hints that Kelley drops during earnings season.
