(Reuters) - Green Mountain Coffee Roasters Inc GMCR.O shares fell as much as 10 percent on Monday to a 52-week low after Kroger Co (KR.N) said it was planning to launch store-branded single-serve coffee cups for Keurig machines that would compete with Green Mountain-branded cups.
Late Friday, Kroger, the biggest U.S. supermarket chain, told Reuters in an interview that it would begin selling cups for the Keurig system.
Green Mountain sells the Keurig brewers, but makes the bulk of its profit from the K-Cups, which, for the most part, only it manufactures. But certain patents on the K-Cup technology are set to expire in September, raising the chance that lower-cost rivals enter the market and pressure prices overall.
“Investors are concerned about any additional competition in the single-serve marketplace. This just adds to the reality of the situation,” said Marc Riddick, an analyst at The Williams Capital Group about Kroger’s upcoming products.
Like many supermarket chains, Kroger sells products under its own private label, which tend to be cheaper than national brands. Analysts fear that those private brands will sell K-Cups for prices that are lower than the current K-Cups.
A Kroger spokesman said Keurig was one system for which it would sell store-branded single-serve coffee cups, but that it may not be the only one. He declined to say whether Kroger would manufacture the cups independently or through a licensing agreement with Green Mountain.
“Even if Green Mountain is doing it, the margins on any private label manufacturing are far inferior to anything that’s branded or even what would be on the partner brands because it’s a lower selling price,” said Stifel Nicolaus analyst Mark Astrachan.
Green Mountain Chief Executive Larry Blanford said last week at an investor conference that the company was open to partnering with private label brands.
A Green Mountain spokeswoman was not immediately available for comment on Monday.
Separately on Monday, investment firm Wellington Management Co reported that it has increased its ownership in Green Mountain this year to 10.8 percent of the company, up from the 8.4 percent it owned at the end of 2011. On Friday, another firm, Capital Research Global Investors, reported that it had increased its stake in the company as well.
A spokeswoman for Wellington was not immediately available to comment.
Through Friday’s close Green Mountain shares have tumbled 80 percent since September amid questions about its management, business strategy and accounting practices.
Green Mountain shares were down $1.65, or 7 percent, at $21.48 in afternoon trading on the Nasdaq, after falling as low as $21.06 earlier in the session.
Options volume in Green Mountain favored the put side as 27,000 contracts traded against 24,000 calls on Monday afternoon, according to options analytics firm Trade Alert.
“There is put buying in the stock as some traders position for further downside in the shares in the near term,” said Interactive Brokers Group options analyst Caitlin Duffy. “However, not all of the option activity is bearish. Some call buying suggests traders are positioning to benefit from a rebound in share price.”
Additional reporting by Doris Frankel in Chicago and Melvin Backman in New York; editing by Sofina Mirza-Reid