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Green Mountain Coffee Roasters Inc. (GMCR) Makes Turnaround with New CEO, Remains Competitive with Keurig Brand

September 03, 2013

Green Mountain Coffee Roasters Inc. (GMCR) has made a significant turnaround due to its new management team from The Coca-Cola Company (KO), who instilled new rigorous accounting standards, and the company is still remaining competitive with its powerful Keurig brand, says Munish Malhotra, Co-Manager at Marsico Capital.

“Back in 2010, 2011, Green Mountain Coffee had some major issues around accounting transparency. The stock lost almost 75% to 80% of its value in the course of 12 months. And we actually thought that there was a real opportunity to come into the name," Malhotra said. "The new [CEO is] from Coca-Cola bottling. So they knew the manufacturing process. They also came in and instilled some fairly rigorous accounting standards that gave us confidence that we thought the accounting issues were behind us."

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Green Mountain is an example of an opportunistic purchase made by Malhotra’s firm, as the they picked up the shares when the stock was out-of-favor. With a considerable amount of research, Malhotra found that GMCR still holds a valuable brand in its Keurig segment, which remains competitive with Starbucks Corporation (SBUX).

“Internally we asked ourselves, do we consume Keurig Brewers?, and everybody said ‘yes.’ And we went into stores, and sure enough, Keurig had not lost any shelf-space to Starbucks or any of the other generic competitors, and that gave us comfort that the brand was still very, very powerful and very valuable. And so, we picked up the shares at a very cheap level when it was out of favor, and it’s been one of our largest contributors to year-to-date performance. And now, actually we would consider it more of a compounder going forward,” Malhotra said.


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