Does Anyone Care How Expensive Single-Serve Coffee Packs Are? (No)

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Even run-of-the-mill single-serve coffee packs are more than twice as expensive as premium coffee, if you calculate the cost of the packets on a per-pound basis, a New York Times article shows. In fact, a pound’s worth of single serve packs costs about four times as much as a regular bag of coffee at Starbucks (SBUX). The price of the cups was one of the factors activist investor David Einhorn noted in his bearish presentation last year about Green Mountain.

Brewing coffee in a coffee machine like the Keurig, made by Green Mountain Coffee Roasters (GMCR), offers the benefit of a fast cup with no coffee left over in the pot. And so far, consumers clearly haven’t been dissuaded. Green Mountain posted 115% growth in K-Cup sales in the fourth quarter, and 7% of all coffee cups were brewed by a single-serve machine in 2011, up from 4% in 2010.

Coffee, it seems, is one area where consumers actually don’t seem to be that price-sensitive. And arguably, the company most responsible for this lack of price sensitivity is Green Mountain’s sometimes partner-sometimes rival Starbucks, which proved that middle class people all over the country will pay a premium for a decent, predictable cup of coffee.

When Starbucks first introduced coffee for more than $1, curmudgeons like myself cried “Chutzpah!” But maybe Starbucks’ real problem was that they didn’t have quite enough chutzpah.



Original Article Source by Barrons.com