Cover Story: Flush With Green

It's been an eventful couple of years for cross-channel specialty coffee retailer Green Mountain Coffee Roasters (GMCR). From acquisitions (three in the last 18 months) to the launch of a B-to-B wholesale website, GMCR has been busy growing its 29-year-old brand. The hard work is paying off. GMCR posted net sales of $803 million last year, up 61 percent from 2008. And this year is proving no different, with the first nine months of GMCR's fiscal year 2010 having produced a net sales growth of 70 percent vs. the same period for fiscal year 2009. In fact, the coffee retailer has now achieved 11 consecutive quarters of better than 40 percent net sales growth.

Impressive stuff considering GMCR's humble beginnings: Company founder Bob Stiller started GMCR in 1981 after being served a great cup of coffee at a small town Vermont coffee shop. He enjoyed it so much he decided to buy into the shop. And so GMCR was born. Although still true to its Vermont roots — the company is headquartered in Waterbury — much has changed from the early days of GMCR. Today the company sells via two e-commerce sites (B-to-C and wholesale), a catalog and retail partners. It no longer operates its own brick-and-mortar locations, however.

Also, GMCR is divided into two business units: the Specialty Coffee unit, which sells coffee, tea and hot cocoa from its family of brands, including Tully's Coffee, Green Mountain Coffee, Newman's Own Organics coffee, Timothy's World Coffee, Diedrich Coffee, Coffee People and Gloria Jean's Coffee; and the Keurig business unit, a manufacturer of gourmet single-cup brewing systems, which serve a variety of the Specialty Coffee unit's roasts.

Consistency 
Across Channels
A recurring challenge for cross-channel retailers is maintaining a consistent marketing/branding message across all channels it interacts with consumers. GMCR is no different. The company involves its in-house creative team in every project, no matter the channel. And GMCR frequently provides support for its in-house teams by partnering with a wide array of vendors.

"Our marketing efforts are designed to maximize both adoption and use of the Keurig single-cup system," says Suzanne DuLong, vice president of investor relations and corporate communications for GMCR. "Both the Keurig system and the brands within it work across all the channels of distribution that reach where our customers buy and consume coffee and related beverages."

For the Keurig brand, that consistency comes from brewing a cup of coffee in less than a minute with no mess or cleanup, says Dave Manly, Keurig's vice president and general manager for its Away From Home and Consumer Direct divisions. "While the brewers differ, they all deliver the same cup of coffee thanks to our brewing technology and proprietary K-cup that comes in over 200 varieties from over a dozen coffee and tea brands," he added.

Acquisitions Expand 
Geographic Footprint, 
Add Production and 
Distribution Capabilities
Starting in March 2009, GMCR began acquiring companies as if they were email addresses. First came the purchase of the Seattle-based Tully's Coffee in March of last year, followed by Toronto-based Timothy's Coffees of the World in November 2009 and lastly California's Diedrich Coffee in May. 
An integral part of GMCR's growth strategy, the acquisitions have served to add production and distribution facilities for GMCR nationwide. The company now counts distribution and manufacturing facilities in Waterbury, Lewiston and Essex, Vt.; Castroville, Calif.; Knoxville, Tenn.; Sumner, Wash.; and Toronto.

"As we look to expand our presence out of our Northeast home, this broader geographic footprint will enable us to be more efficient, producing and distributing varieties closer to customer demand," DuLong notes.
 Prior to its acquisitions, for example, if a GMCR customer on the West Coast wanted to purchase a Vermont blend K-cup, that product was manufactured in Vermont and trucked all the way to the West Coast. Bringing aboard the new production and distribution has helped establish a more efficient distribution system.

Part of GMCR's expansion strategy is a push into the wholesale market. In late April, GMCR launched GMCRWholesale.com, a website designed to serve customers of its Specialty Coffee business unit. The site details full-service coffee programs customized by channel to help wholesale customers increase sales and profits, drive customer visits and loyalty, and increase customer satisfaction.

In addition to its efforts to acquire more of the wholesale retail marketplace, GMCR has targeted the corporate office world as a vertical ripe for growth. Citing recent statistics that found 30 percent of coffee is consumed away from home, and that 10 percent of coffee is brewed in offices, GMCR's wholesale website was launched with the goal of targeting and capturing a bigger percentage of the small office marketplace.

"Of the 5.5 million estimated offices in the U.S., 80 percent of those have less than 20 people," DuLong says. "The B-to-B wholesale site was designed with tools for small office managers to better plan for and order coffee based on a number of variables – number of employees, number of visitors, among others."

Putting its Money Where its Mouth Is
At the core of GMCR's corporate culture is a commitment to social responsibility and environmental sustainability. The company prides itself on its social accomplishments, which include offsetting 100 percent of its direct greenhouse gas emissions, investing in Fair Trade Certified coffee and donating at least five percent of its pre-tax profits (last year that translated to $3.7 million) to social and environmental projects.

GMCR also encourages its employees to be active in the community with a paid-leave-for-community-service program, offering them up to 52 hours of paid time off per year to volunteer in their communities.
 GMCR sends employees to "source," which involves sending them to coffee farms around the world to observe grassroots production.

Seeing the labor involved in the coffee growing process motivates you to promote things like Fair Trade Coffee, says Ken Crites, director of consumer direct for the Specialty Coffee business unit. "The experience motivates you to treat every coffee bean as precious," he added.

GMCR's social responsibility ties into its business model. "What's good for the world is good for our business," DuLong says. GMCR feels its commitment to environmental sustainability has provided it with a competitive advantage. In particular, it focuses on six areas:

•partnering with supply-chain communities;

•supporting its local community;
•protecting the environment – GMCR has delivered normalized waste reduction of 43 percent over the last five years and normalized energy reduction of 56 percent over the same time period;
•building demand for sustainable products – in 2009, 30 percent of GMCR's coffee sold was Fair Trade coffee, and it recently announced that two of its most widely distributed varieties, Green Mountain Coffee blend and Vermont Country blend, will be Fair Trade certified;

•working together for change; and

•creating a great place to work, illustrated by GMCR's 92 percent employee retention rate in its 
FY 2009.

Additional Channels 
to Engage In
With a Facebook page, Twitter account and company blog, GMCR has an active presence in today's social media landscape. A relative newcomer to the space, GMCR views its social media efforts as a tool to reinforce its brand and messaging. While not a direct sales channel like its catalog and e-commerce sites, GMCR believes social media can be an awareness tool that helps drive future sales.

Independently owned and operated brick-and-mortar stores aren't a part of GMCR's operations … at least at the moment. The company does have a visitor center at its headquarters in Westbury, Vt. that sells products, but that's all. Not willing to say never, DuLong says retail isn't the company's current plans as it seeks to continue its meteoric growth. 
With a business model that's consistently producing quarter-over-quarter and year-over-year profits well into double digits, the thinking is why fix what isn't broken.