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Keurig Green Mountain Inc. (NASDAQ: GMCR) 17 March 2014 Saad Hirani | David Liang

Keurig Green Mountain Inc. (NASDAQ: GMCR) 17 March 2014 Saad Hirani | David Liang. Agenda. Industry Analysis Company Analysis Company Fundamentals Chart Analysis Competitors Competitive Analysis Entry strategy.

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Keurig Green Mountain Inc. (NASDAQ: GMCR) 17 March 2014 Saad Hirani | David Liang

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  1. Keurig Green Mountain Inc. (NASDAQ: GMCR) • 17 March 2014 • SaadHirani | David Liang

  2. Agenda • Industry Analysis • Company Analysis • Company Fundamentals • Chart Analysis • Competitors • Competitive Analysis • Entry strategy

  3. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Industry Analysis - Coffee retail and production Overview Stable Consumption • World’s second most sought-after commodity • Valued at $100 billion worldwide Addressable Market • 107 million people in the United States drink coffee at an average of 3.5 cups per day • 2010 retail coffee industry was $30-$32 billion in the United States • Inexpensive luxury good • Coffee consumption very resistant price swings Coffee retail and production industry has a huge addressable market with stable consumption.

  4. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Company Analysis – Keurig Green Mountain Company Overview • Coffee producer and coffee brewer manufacturer in USA and Canada • Forms: whole bean, ground coffee, single-serve portion packages • Keurig single-cup brewers and single-serve portion packs • (92% of net sales in 2013) 39% Value Proposition • Instant coffee with consistent quality • Less than 3 minutes • Over 290 selections Keurig Green Mountain is a coffee producer (traditional and single-serve packaging) and manufacturer of the Keurig single-serve coffee brewers.

  5. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Company Analysis – Keurig Green Mountain Business Model • Razor blade and razor model • Sell brewer at cost • Sell K-cups at high margin • K-cup variety sold through: • Own brands (Tully’s, Van Houtte, Timothy’s) • Licensed brands (Starbucks, Dunkin’ Donuts, Tazo, Folgers) • Generic brands Keurig Green Mountain is a coffee producer (traditional and single-serve packaging) and manufacturer of the Keurig single-serve coffee brewers.

  6. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Company Fundamentals Essential Statistics Highlights • Gross profit grew 40% (2012) and 27% (2013) • Record high 5.1mm Keurig machines sold in 2014 Q1 • Debt-to-assets decrease form 24% (2010 to 4% (2013) • Market Cap: $16.86 bn • $33.3 bn (KRFT) $169.4 bn (NESM) • P/E: 33.6 (Industry average: 17.7) • Forward P/E: 25.4 • ROIC: 16.6% Keuring Green Mountain has seen consistently growing revenues and operating margins. A decreasing debt-to-assets ratio means a lower leveraged position

  7. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Chart Analysis Source: Google Finance

  8. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors | Summary Competitors Main Competitors Generic-Brand K-Cups • Nestle (Nespresso) • Kraft Foods (Tassimo) • Starbucks Corp. (Verismo) • Keurig Green Mountain’s patent on K-cups expired in 2012 • Generic K-cups entry into market • Minimal impact • Green Mountain’s coffee brands grew 34% while K-Cup industry grew 38% • ROIC grew from 13% (2012) to 17% (2013) Competitive Advantage • Lower costin Keurig brewer price • Lowest starting price • Largest variety of coffee options offered in K-Cups • Both KeurigGreen Mountain brands and from generic brands • 2014 Single-serve brand of the year Keurig Green Mountain is the strongest competitor in the single-serve coffee industry due to the lower price range of its brewers and its offering of the largest variety of coffee.

  9. Industry Analysis | Company Analysis | Company Fundamentals | Charts | Competitors| Summary Summary Catalysts Entry Strategy • Growth of single-serve coffee industry • Buy GMCR when stock price drops below $100.00 • Current price: $115.56 • Hold into Q2 earnings report on May 7, 2014 • Single-serve coffee has 30% of coffee industry dollar share2 • Up from 8% in 2011 Keurig Green Mountain is the company best positioned to benefit from the shift from traditional automatic drip coffee makers to single-serve coffee.

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