Starbucks' Loss is Green Mountain's Gain

Last Updated Aug 15, 2008 4:48 PM EDT

The people who once frequented Starbucks, but don't any more either to avoid the expense or because their nearest outlet was one of the 600 the chain has recently closed have to get their fix somewhere.

greenmountainMany are opting to drink more coffee at home or at work, and because of that, Green Mountain Coffee Roasters is flourishing. As Zack's, an investment site, points out today, Green Mountain recently beat analysts' expectations by a whopping 19 percent. Its net income surged 67 percent in its third quarter. Sales were up 43 percent.

Green Mountain appeals to the same demographic that Starbucks does, but it doesn't force them to head to a store to buy a not only the coffee, but the cup, the stirrer, the napkin, the cream, and the "experience." They can just make the stuff at home, paying for nothing but the coffee beans.

Of course, it's not as convenient as Starbucks, which offers the ability to grab a cup on the way to work. But in hard economic times, paying for pricey conveniences seems like more of a luxury.

On top of that, Green Mountain does a huge business in office coffee systems. The company recently announced that it will open a new plant in Tennessee to make "K-Cups" packs, a single-serving package designed for Keurig brewing machines, which make one cup at a time. "The single serving brewer that has replaced coffee pots in large offices has a unique look, is easy to use, and brews a cup of coffee in less than one minute," notes Zacks.

The company's office coffee services arm makes up nearly a third of its sales.

Green Mountain projects it will grow 20 percent over the next five years. Starbucks, meanwhile, is struggling just to stay above water.

  • Dan Mitchell

    Dan Mitchell has spent the past 20 years writing and editing for newspapers, magazines, and Web publications. Currently, he writes the What's Online column for the Saturday business section of the New York Times. He has also written for the Chicago Tribune, the Minneapolis Star-Tribune, National Public Radio, Business 2.0, and Wired.