Is Supervalu’s New K-Cup a Positive Trend in This Hot Space?

When coffee drinking amoung American adults is near ubiquitous and brewing the perfect cup is subject to as staunch opinions as politics, new methods appear constantly to shake convention. Tuesday the Supervalu (NYSE:SVU) line of supermarkets — including Jewel Osco, Albertson’s, and Save-A-Lot — announced plans to launch its own line of single-serve coffee pods that will be compatible with leading brewing systems.

Keurig’s single-cup coffee pots, manufactured by Green Mountain Coffee Roasters (NASDAQ:GMCR) is one such machine. Until the advent of Supervalu’s Java Delight Singel Serve UnCup, Keurig brewed only Green Mountain, whose company was the number one seller of single-serve coffee pods. The company has not yet released a statement regarding this change to their product.

Supervalu’s coffee pods work interchangeably with those of the Keurig brand and will be sold starting this month in 1,100 supermarkets nationwide.

Each golf-ball sized container of coffee, known as a pod, are meant to simplify the brewing process and keep the ground beans fresh; they come in one of six flavors, and according to the company’s news release, will be made with 30 percent less material than the national brand.

“The UnCup provides our customers with a premium single serve coffee at an affordable price,” said Supervalu Vice President of private brands Sam Mayberry in a statement. However he did not mention the retail cost of the pods for the consumer.

Let’s analyze this news with the most relevant aspect of our CHEAT SHEET investing framework:

T = Trends Support the Industry in which the Company Operates

Keurig cups are the hot trend in coffee consumption. However, on Sept. 16, Green Mountain’s K-Cup patents will run out, and Supervalu is merely one new competitor. TreeHouse Foods (NYSE:THS) investors got a boost after a Citigroup analyst upgraded the maker of private-label products on news the company will also get into the generic K-Cup business. Starbucks (NASDAQ:SBUX) and Dunkin’ Brands (NASDAQ:DNKN) will also obviously go gangbusters once the patents expire. Thus, the once powerful legal moat protecting Green Mountain will soon dry up, creating new winners and losers riding the coffee industry’s biggest trend.

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