1. Green Mountain Coffee Roasters, Inc.
April 30, 2013
Hada Jang Shicheng Tang Yijin (Iris) Zhang

2. Agenda Introduction Company Overview Industry Overview
Stock Performance
Financial Analysis
Valuation
Recommendation

3. Company Profile Headquartered in Waterbury, Vermont
One of the leading companies in the specialty coffee and coffee maker businesses.
Employed about 5,800 people as of Sep 29, 2012
Top four best-selling coffeemakers by dollar volume in the United States
Source: GMRC Inc Annual Report
Introduction
Company
Industry
Valuation

4. Company History
2011: GMCR sold the "Filterfresh" US coffee service portion of Van Houtte's business to Aramark
2006: GMCR acquired KEURIG, Incorporated, a manufacturer of single-cup brewing systems.
1981: Green Mountain Coffee Roaster was established as a small café in Vermont
1981
1993
2006
2010
2004
1981
1993
2006
2010
2011
1993: GMCR started publicly trading on the NASDAQ national market
2010: Green Mountain Coffee acquired Diedrich Coffee for $305.3 million and bought coffee services company Van Houtte for $907.8M
Source: GMRC Inc Annual Report
Introduction
Company
Industry
Valuation

5. Product Segments
The Company manages its operations through three operating segments, the Specialty Coffee business unit (“SCBU”), the KEURIG business unit (“KBU”) and the Canadian business unit (“CBU”).
SCBU sources, produces and sells coffee, hot cocoa, teas and other beverages, in a variety of packaging formats, to consumers in the United States.
KBU targets its premium patented single cup brewing systems for use both at-home (“AH”) and away-from-home (“AFH”), in the United States.
CBU sources, produces and sells coffees and teas and other beverages to Canadian consumers.
Source: GMRC Inc Annual Report
Introduction
Company
Industry
Valuation

6. Sales Breakdown
Net sales for fiscal 2012 increased 46% to $3,859.2 million, up from $2,650.9 million reported in fiscal The primary drivers of the increase in the Company’s net sales were a 59%, or $1,004.9 million, increase in single serve pack net sales, and a 45%, or $235.1 million, increase in KEURIG Single Cup Brewer and accessories sales.
Source: GMRC Inc Annual Report
Introduction
Company
Industry
Valuation

7. Historical Financials
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
Introduction
Company
Industry
Valuation

8. Competitive Strength – SWOT Analysis
Weaknesses
Leading market position built on strong product portfolio
KEURIG unit contributes to strong revenue growth
Corporate image built on sustainability initiatives
Customer loyalty
Reliance on a single manufacturer in China for single cup brewers
Dependence on certain retailer for a substantial portion of revenues
Opportunities
Threats
Strategic agreements to bolster revenues
Entry into functional drinks market in the US
Competition in specialty coffee is intense
Increased demand for high-quality Arabica coffee beans coupled with possible supply shortages
Source: Marketline
Introduction
Company
Industry
Valuation

9. Porter’s Five Forces Threat of Substitutes: Medium
54% of Americans over age of 18 drink coffee on a daily basis
Threat of Substitutes: Medium
Expiration of K-Cup pack patent in September 2012
Competitive Rivalry: High
Lower entrance barrier to existing competitors
Higher entrance barrier to new entrants
Threat of New Entrants: Medium
Increase in consumers’ option  Lower command power in terms of pricing
Buyer Power: High
Heavy dependency on specialty coffee farms
Supplier Power: High
Introduction
Company
Industry
Valuation

10. Macroeconomic Indicators
Introduction
Company
Industry
Valuation

11. Stock Performance Equity Snapshot Price: $ 56.47 (April 29, 2013)
Beta: 0.31 (0.94 on 5yr avg.)
Trailing P/E: 24.39
Forward P/E: 17.54
PEG Ratio (5 yr. expected):
1.04
P/B Ratio: 3.63
No divined
Source: Finance.yahoo.com
Introduction
Company
Industry
Valuation

12. Stock Performance
Introduction
Company
Industry
Valuation

13. Key Financial Ratios Introduction Company Industry Valuation
Source: Capital IQ
Introduction
Company
Industry
Valuation

14. Valuation – Trading Comparables
Introduction
Company
Industry
Valuation

15. Valuation – Trading Comparables (Cont’d)
Introduction
Company
Industry
Valuation

16. Valuation – WACC Analysis
Introduction
Company
Industry
Valuation

17. Valuation – Revenue Projection
FY 2009: acquired the wholesale business and certain assets of Tully’s Coffee Corporation
FY 2010: acquired Timothy’s Coffee of the World Inc. (Nov 13, 2009); Diedrich Coffee, Inc. (May 11, 2010)
FY 2011: acquired LJVH Holdings, Inc. and Subsidiaries (“Van Houtte”) on December 17, 2010
Introduction
Company
Industry
Valuation

18. Valuation – DCF
Introduction
Company
Industry
Valuation

19. Risks & Drivers Risks Drivers Expiration of K-Cup pack patent
Sales concentration
Lower activity and liquidity
Higher debt level
Risks
Top selling single cup brewer
Partnerships with strong existing brands
Expansion
Discount to the competitors
DCF Valuation
Drivers
Introduction
Company
Industry
Valuation

20. Recommendation
Watch List