Starbucks Keeps Selling K-Cups By The Boatload

According to the latest data, Starbucks continues to dominate the K-cups business. A new report by UBS analyst Keith Siegner looked at what the latest numbers mean for Starbucks’ shareholders.

The Numbers

Starbucks’ single-serve sales increased an incredible 41 percent year-over-year in the four weeks ending on September 5. Sales for that period included 53 percent year-over-year unit growth. In addition, Starbucks’ K-cup market share increased 0.40 percent on the month to 16.7 percent.

Related Link: Trend Specialist Explains His Short Position In Starbucks

Not Just K-Cups

Starbucks’ outperformance has not been limited to K-cups. The company grew its ground packaged sales by about 14 percent year-over-year, easily outpacing the overall 2.5 percent growth in the category as a whole.

“SBUX’s K-Cup and bagged coffee sales acceleration is benefitting from product variety, innovation & execution against heightened competition,” Siegner wrote.

Competitive Environment

Competition in the K-cup market continues to intensify, even as growth in the category is decelerating. Siegner notes that Dunkin and McDonald's joined Starbucks in making modest K-cup market share gains during the month, mostly at the expense of Keurig Green Mountain.

Outlook

UBS remains bullish on Starbucks’ stock and believes that the company will continue to benefit from K-cup sales growth and the addition of other promising new products. The firm has a Buy rating on Starbucks and its $63 price target is based on about a 17x 12-month forward EBITDA estimate.

Disclosure: The author holds no position in the stocks mentioned.

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