Green Mountain Coffee

Green Mountain Coffee - Jeremy Knighton Professor Bruce MGT...

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Jeremy Knighton Professor Bruce MGT 400 Case Study October 2007 Green Mountain Coffee and the Specialty Coffee Industry The industry of premium coffee production has had a shadow cast over it by the coffee juggernaut, Starbucks. As any American who has been out of their home in the last fifteen years knows, Starbucks has virtually taken over the coffee retail business all over the US. It would prove quite difficult to go to any relatively large city or town and not see at least two Starbucks retail stores or find their products in the local grocery store. With such a formidable competitor present in the industry, it seems improbable that any other producer of premium coffee would be able to compete. A small, Vermont based coffee brewer by the name of Green Mountain Coffee Roasters (GMCR) has managed to carve out a piece of the market for itself and has begun spreading all over the northeast United States. Originating in 1981, Green Mountain Coffee was originally supplied to customers of a small café but once word spread of their high quality coffee beans and unique selection and roasting process, their product began to spread to different venues. Restaurant and hotel demand boost Green Mountain into the wholesale industry. Within the next fifteen years they had opened twelve company stores that were responsible for ten percent of their income. However, they noticed a steady decline in the returns they were seeing from these retail stores and decided to close its stores; a risky move considering that they had always been an important means of providing samples of their product to the consumer. Despite this setback, GMCR has been able to remain competitive through their whole sale customers and mail order consumers. This has been
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made possible by their commitment to superior quality and their ability to analyze and react to the changing industry. One of the most important aspects of GMCR’s business strategies is its commitment to socially responsible business practices. This helps assure the consumer that they are supporting a company that embraces moral standards. This seemingly small characteristic has proven to be effective in remaining a viable competitor to Starbucks, who by all rights should have run a comparatively small business like GMCR out of the industry. Starbucks generates roughly eighty-five percent of its revenue or 2.1 billion dollars through the sales made at their retail stores all over the world. These numbers seem daunting to any hopeful competitor, but GMCR has managed to develop a growth strategy that is aimed at securing the home coffee market, a market that the National Coffee Association’s study on coffee drinking trends says is where 75% of coffee drinkers consumer coffee (Moody & Eisner, 2004, 583). This along with a dedicated understanding of Porter’s Five Force Model will help to ensure their growth within the industry. Of the five forces in Porter’s model, the first is recognizing and dealing with the threat of new entrants. This is to say that there is always a potential for a new competitor
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This note was uploaded on 04/17/2008 for the course MGT 400 taught by Professor Bruce during the Spring '08 term at Gettysburg.

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Green Mountain Coffee - Jeremy Knighton Professor Bruce MGT...

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