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Green Mountain Coffee Roasters

Green Mountain Coffee Roasters, originating as a quaint café in Vermont, has grown into a major player by focusing on organic and fair-trade coffee. Their partnership with Keurig allows them to sell coffee through K-Cups, which constitutes the majority of their sales and highest profit margins. Despite a recent upgrade in credit rating to 'B+', challenges remain, including significant uncertainties around their financial metrics and market performance. Evaluating factors such as the cost of equity and debt reveals complexities in predicting GMCR's future trajectory.

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Green Mountain Coffee Roasters

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  1. Green Mountain Coffee Roasters Matt Moore

  2. Background • Started as small café in Vermont • Organic and Fair-Trade Coffee • Keurig Machines & K-Cups • Sell to wholesale Customers • Most of sales from K-Cups • Highest margins are on K-Cups

  3. Competitors

  4. Recap Mod 6

  5. Cost of Equity CAPM

  6. Cost of Debt 10-K: 4.0% Calculated using int exp: 7.2% Significant difference, will use 10-K.

  7. Cost of Operating Capital

  8. Credit Rating Sept 2013: S&P upgraded from GMCR Credit Rating from “BB-” to “B+” Positive change, but still not considered “High Grade, High Quality”

  9. Betas

  10. Betas Wide variety of different betas Beta I calculated in the middle 95% CI: -.079  2.25 Both NASDAQ above CI, Bloomberg close

  11. Valuing GMCR

  12. Uncertainty There is a lot of uncertainty around CMCR While the Sales & R&D are greatly improving, betas are scattered across the board, WACC is high, and credit rating is low Hard to predict future given such contradictory factors

  13. Questions

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