Starbucks Keeps Selling K-Cups By The Boatload

• The latest K-Cup sales data shows that Starbucks continues to outperform its competitors
• Starbucks has recently outperformed peers in ground package coffee sales growth as well
• Starbucks, Dunkin and McDonalds all continue to gain K-Cup share from Keurig Green Mountain

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

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

Not just K-Cups
Starbucks’ outperformance has not been limited to K-Cups. The company grew its ground packaged sales by about 14 percent Y/Y, 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 writes.

Competitive environment
Competition in the K-Cup market continues to intensify, even as growth in the category is decelerating. Siegner notes that Dunkin’ Brands Group Inc DNKN and McDonalds Corp MCD joined Starbucks in making modest K-Cup market share gains during the month, mostly at the expense of Keurig Green Mountain Inc GMCR.

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.