...Leveraged Sellouts, LLC. LEVERAGED Building on Immense Growth: Betting on Quality, Convenience, and Choice SELLOUT S Presentation to GMCR Board of Directors April 19, 2012 Executive Summary: Betting on Quality, Convenience, and Choice Takeaway: GMCR has bet on a growing trend in speciality coffee by investing in creating value through quality, convenience, and choice for coffee drinkers. However, these investments rely on patent acquisitions, which have a short-lived contribution to ROIC, and customer relationships, one of which is brewing trouble. Page Section 3 Coffee Market Competitors • • Specialty, Brew-at-Home coffee Wakes U.S. coffee economy GMCR Competes most directly with Nestle and Mars by selling both coffee AND brewers Reinvestment and Acquisitions secure Competitive Advantage and enable profit growth Market position Built on Relationships, although Customers pose notable Risks Inventory management Concerns: Revenue & margins growing, but Inventory Outpacing Sales New Invested Capital has Dual Effect on ROIC Address Immediate Threats to Patents and Relationships 2 4 5 Competitive Advantage • 6 Partners • 7 Inventory Management • 8 ROIC Immediate Imperatives • • 9 Perking Up: Specialty Coffee Wakes U.S. Coffee Economy Takeaway: “Premium-ization” and rising disposable incomes drive 4.7% annualized demand growth, much of it led by popularity of speciality coffee and growing awareness of...
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