Keurig Green Mountain (GMCR) 2015 Annual Meeting of Stockholders

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I attended the Keurig Green Mountain (GMCR) 2015 Annual Meeting of Stockholders on January 29, 2015. It was held at The Essex Resort & Spa in Essex, Vermont.

Green Mountain Coffee Roasters is one of the very few of my investments where I can actually participate in an annual meeting.

Below are some notes taken from the shareholder presentation…

Keurig Green Mountain’s Vision

Keurig Green Mountain’s vision is to become the world’s leading personal beverage system company (instead of coffee company).

Financials

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Company Values

  • We partner for mutual success  – Our boundaryless approach to collaboration creates benefits for all.  Partnering is very important to the company. Partnering with competitors as well as suppliers. It’s important to the company to be inclusive of all the brands that customers want to use. “Not many companies welcome competitors and partner with them. Our business is to win across all aspects of business”
  • We innovate with passion – With courage and curiosity, we are shaping the future by redefining the customer experience.
  • We play to win – Our team sets ambitious goals and meets each challenge with unified purpose and character.
  • We brew a better world – We use the power of business to make the world a better place.

Keurig 2

  • 5 Principles of Keurig 2
    • Ultra convenient
    • Intuitive simplicity
    • Less waste
    • Freshest taste every time
    • Vast brand selection
  • Currently have 400 variety and 60 brands. Will be up to 500 varieties and 70 brands in 2 months.
  • 20 new brand relationships in last year.
  • Most coffee brands now included.
  • Keurig Green Mountain benefits from network effect. Started with selling households on Green Mountain Coffee. Then, sold them on the Keurig system which then allows them to introduce other brands into those households. Those new brands also add more households to using the Keurig system, which expands usage of other brands.
  • Still only in 16% of households, which means there is more growth potential.
  • Designing system is key – the whole process from bean to cup designed in house. Innovation to solve problems in plain sight. With Keurig, consumer didn’t realize there was a problem, but when they see the Keurig system they run to it.
  • 2 years ago it wasn’t normal for consumer to buy coffee at Macy’s
  • The biggest problems the customer saw before Keurig 2.0 was the user couldn’t brew more than 1 cup. Keurig 2.0 solved the problem by allowing more sizes.

gmcr-2015-202Keurig Cold

  • Features:
    • Beverage delivered cold
    • Carbonation with no CO2 canister
    • Perfect dosing & one touch simplicity
    • Sustainable
    • Vast brand selection
  • Keurig Cold attempts to solve problems in plain site that the customer may not realize are there such as temperature, choice, in home storage, freshness, shoppability, and formula influence.
  • Keurig Cold will launch this fall 2015
  • Vast brand selection, including Cola Cola and Dr Pepper Snapple brands.

2020 Sustainability Targets

  • Goal is to have a 100% recyclable kcup by 2020. Starting and pursuing well before that
  • Each part of kcup is recyclable, but not recyclable in entirety. A kcup has 4 parts that are each recyclable, but no process to split up. (aluminum lid, plastic cup, paper filter and compostable grounds.)
  • Kcups that are about to launch are also recyclable, working with large firms across country to ensure recyclability.
  • Water stewardship – hosted a world water summit in Stowe, and will hold a 2nd one also in Stowe.

Objectives Going Forward

  • Execute current hot system strategy in North America
  • Launch new brewer technologies
  • Enter new beverage and adjacent categories
  • Offer new brands
  • Enter geographies – 2015 plans to expand in Korea

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Questions?

  • What percent of jobs in Vermont? What can Vermont do to promote more jobs in Vermont.
    30% in Vermont, 1 facility in Tennessee, 1 in Seattle and 3 here in Vermont. Most manufacturing is in Vermont. First Keurig Cold product facility is in Williston Vermont. Keep being a great place to work.
  • Martin Post (shareholder for many yrs.) RFID tech with manufacturer? 
    If partnership works with both parties, currently working with Conair, Cuisinart and Jarden.
  • What about a portable system to bring to beach or on the road in a backpack?
    Power is the problem, but love the idea of carrying in a backpack
  • Has zero sort recycling in Killington, but kcup doesnt have symbol on bottom?
    To avoid confusion from customers who may think all of kcup is recycleable, it is 1-7 recycleable compatible.
  • International expansion?
    Selective and focused handful of countries over next few years where it will be loved, such as instant markets, small kitchen = smaller system, ie Korea and Japan. Identified 30 countries to expand slowly but surely for hot system. Internationally, Keurig Cold could do well as beverages are standardized around the world, so it may globalize at faster pace. Hot beverages are more difficult as they are not standardized around the globe.
  • Daniel Cox – Bean procurement moved to Switzerland?
    Switzerland is the hub of where global procurement happens.
  • How come non-licensed 3rd parties can produce pods that work with Keurig 2.0?
    It wasn’t the intent to lock others out. We don’t focus on what others are doing. It was to deliver the benefits it stated it would – the best coffee for each brand, every time.
  • Brian McKay NH – GE partnership in a fridge for Keurig Cold beverages?
    Yes, Keurig in fridge door and love it. Access to both cold and hot, on high end of the fridge line.
  • Tom Brewhan of NH A more convenient way to deliver 5 gal water to machines? Partnering with water companies?
    Yes good idea, especially with water delivery for offices.
  • Partner with Jim Beam?
    🙂  you will be the 1st to know!
  • Editing sweetness?
    Not as first, but maybe over long term. We want consumer to have options. We think beverages are going towards custom crafted drinks. It wont be just the large brands, there will be healthy versions with cane sugar, organic, etc
  • Matrin Perry – Downfalls of system, if power is gone the system’s clock resets?
    Perhaps a backup battery – liked the idea!

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