Company's shares walloped on news of declining sales, restructuring
Waterbury, Vt.—Keurig Green Mountain, the investor darling that went from a small town Vermont coffee roaster to a multi-billion dollar global enterprise in little more than a decade, may need a high dose of caffeine. The coffeemaker and owner of the Keurig single-brewer brand reported a steep 5 per cent decline in sales for the third-quarter of 2015.
While pod-equivalent serving volume grew by 5 per cent, and at 12 per cent in U.S. homes, the decline in sales is a stark departure from the company’s overwhelmingly upward trajectory.
“While we are not pleased with our revenue growth, we delivered earnings at the high end of our previous guidance,” president and CEO, Brian Kelley, said. “We are taking decisive actions to adapt and compete more effectively in today’s rapidly-evolving, dynamic marketplace.”
The company has stumbled over the past 12 months, recalling millions of Keurig coffee makers last December, and launching an unpopular new generation of Keurigs that attempted to lock out competitors coffee pods last fall. The ensuing pod controversy led to a corporate mea culpa, with Green Mountain admitting it had had made a mistake by trying to force its own K-Cups on customers.
The company’s latest sales slump has forced Keurig to reevaluate. It will institute a multi-year productivity program designed to generate approximately $300 million in cost savings over three years. The company said the cost-saving program will force it to reduce its workforce by approximately 5 per cent.
The news jolted shareholders like a cup of the company’s dark roast. Shares plunged nearly 30 per cent at the start of trading Aug. 6 and remained there, closing at US$52.67 after opening at just under $75.