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 (NASDAQ: 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 (NASDAQ: DNKN) and McDonalds Corp (NYSE: MCD) joined Starbucks in making modest K-Cup market share gains during the month, mostly at the expense of Keurig Green Mountain Inc (NASDAQ: 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.