J.M. Smucker benefits from Dunkin Brands’ continued expansion. At the end of the first quarter of this year, Dunkin Brands had approximately 10,500 Dunkin’ Donuts in 38 states, the District of Columbia, and 31 other countries. More are on the way and that increases the exposure for those wanting Dunkin’ Donuts coffee and helping J.M. Smucker sell more Dunkin’ Donuts coffee in the grocery aisle.
The growth for J.M. Smucker is in the premium coffee segment, and the company has a second partnership to capitalize on this trend with Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). J.M. Smucker has a partnership with Green Mountain to produce J.M. Smucker coffee brands for the ever-popular K-Cups. K-Cup sales contributed $290 million in revenues last year. This year the company will introduce new flavors of K-Cups in the United States and Canada.
Sales growth for K-Cups came in at 18% in the latest quarter, and sales for K-Cups are projected to increase 15% this year. What I like most about this business is that two years ago it didn’t exist–J.M. Smucker and Green Mountain Coffee formed the partnership in February of 2010. The partnership gives J.M. Smucker the ability to sell its branded K-Cups through its distribution channels. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) Coffee can sell K-Cups with J.M. Smucker coffee brands through its website. It’s a win-win for both companies in the fast-growing single-cup coffee business. J.M. Smucker benefits because Green Mountain Coffee is the market leader in the single-cup coffee business with its Keurig machine.
Over the past year Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has been on a tear, rising over 256%. Even though the company is rapidly growing, new entrants are coming into the single-cup business, and Green Mountain Coffee is dependent on retaining its position in the single-cup business. In the long-term I like Green Mountain coffee, but investors should consider waiting for a dip to initiate a position.
How the 3 companies stack up
| J.M. Smucker | Green Mountain Coffee | Dunkin Brands | |
| Market Cap | $10.87 billion | $11.35 billion | $4.42 billion |
| Revenue | $5.91 billion | $4.16 billion | $667.67 million |
| Gross Margin | 0.34 | 0.35 | 0.79 |
| EBITDA | $1.21 billion | $881.57 million | $313.12 million |
| Operating Margin | 0.16 | 0.16 | 0.39 |
| Net Income | $513.54 million | $405.19 million | $106.11 million |
| P/E | 21.51 | 29.28 | 44.20 |
Foolish assessment
Of the three companies, I like J.M. Smucker the most. It is more diversified than the other companies with its many food products. By owning J.M. Smucker, you get exposure to both Green Mountain Coffee and Dunkin Brands.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article With A Name Like Smucker’s, The Stock Has To Be Good originally appeared on Fool.com is written by Mark Yagalla.
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