K-Cups shielded from coffee price swings: Green Mountain CEO
Don't worry coffee drinkers. Your daily K-Cup habit shouldn't get more expensive as coffee commodity prices skyrocket, Green Mountain Coffee Roasters' chief executive officer told CNBC on Wednesday.
That's because the company's trademark coffee pods have a price premium built in that should protect them from swings in coffee futures, Brian Kelley said in his first interview since announcing a huge deal with Coca-Cola two weeks ago.
Arabica coffee prices surged to 16-month highs Wednesday off concerns about crop damage caused by a severe, weeks long drought in Brazil. Prices of arabica coffee beans have seen a 40 percent increase during the past year.
"There's no question the market has come up and may continue to come up," Kelley said on "Squawk on the Street." "We're well-protected. ... The most important thing about coffee pricing is that single-cup pricing has continued to premiumize the category regardless of what the commodity prices of coffee have done. We see that continuing."
Coca-Cola announced earlier this month a $1.25 billion, 10-year deal with Green Mountain to collaborate on the company's upcoming Keurig Cold system. The new product allows consumers to make cold beverages at home the same way current Keurig users make coffee and tea with prepackaged pods.
Kelley told CNBC to expect the new cold drink system to hit store shelves in fiscal 2015.
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Kelley said the biggest obstacle for Keurig Cold would be the development of a large user base. He expects the system to catch on more quickly than its hot beverage counterpart, mainly because about 18 million homes now have a K-Cup coffee maker, he said.
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"Ten years ago there wasn't a Keurig in a home," Kelley said, adding that his company was acting on consumer requests for a cold beverage system. "They want it conveniently. They want to put a pod in, push a button and get a drink."
—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street." Reuters contributed to this report.