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Issue Date: Vol. 54, No. 6, June 2014, Posted On: 5/8/2014

Keurig Green Mountain Q2 Profit Soars Amid Higher Brewer And Portion Pack Sales

Emily Jed
TAGS: office coffee service, OCS, vending, Keurig Green Mountain, Keurig second quarter, coffee business, Keurig 2.0 hot system, Keurig partners, Keurig cold system, Brian Kelley, Keurig's president and chief executive

WATERBURY, VT -- Keurig Green Mountain reported double-digit sales and earnings growth in the second quarter, driven by strong brewer and portion pack sales of its brewers, along with cost reductions. Net income for the three months ended March 29 climbed 22% to $162.1 million, or $1.03 a share, from $132.4 million, or 87ยข per share, in the comparable period a year earlier. Revenue grew 10% to $1.1 billion from $1 billion a year ago.

Net sales of portion packs climbed 13% year-over-year, and net sales of brewers and accessories rose 9%. Some 1.8 million Keurig system brewers were sold during the quarter.

Keurig single-cup brewers, portion packs and related accessories accounted for 94% of second-quarter net sales, with the balance consisting primarily of bagged coffee, fractional packs and the company's Canadian OCS business.

Sales of other products declined $16.7 million, or 20%, from the prior year period, which the single-cup giant attributed to the continuing demand shift from traditional coffee package formats to portion packs.

Cost cuts drove a 23% lift in operating profit to $260 million in the second quarter.

"Short term, we are focused on successfully introducing our Keurig 2.0 hot system; adding a number of additional brands as new Keurig partners; and preparing for the launch of our Keurig cold system in fiscal year 2015," said Brian Kelley, Keurig's president and chief executive. Longer-term plans call for continued investment in Keurig innovation, from new product development to merchandising, Kelley added.

Keurig is now forecasting adjusted net income of $3.63 to $3.73 per share in fiscal 2014, down from its previous estimate of $3.75 to $3.85. It's standing by its projection that revenue should grow by a high single-digit percentage from last year's total of $4.36 billion.

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