Green Mountain Coffee Roasters reshuffles production, management

by Hilary Niles September 12, 2013 vtdigger.org Green Mountain Coffee Roasters predicts continued growth, and the publicly traded company appears to be reshuffling its deck in order to deliver.
In the past few months, the Waterbury-based firm with operations across the US and in Canada has consolidated its two domestic business units, dropped two unit presidents, expanded its board of directors, said goodbye to its founder, announced the closure of a production plant in Toronto, seen two patents expire, started a partnership to offer Campbell’s soup in K-Cups and changed the way it evaluates profitability.
Meanwhile, the company’s accounting practices remain under investigation by the federal Securities and Exchange Commission, and a former systems administrator from the Waterbury office and his friend in Connecticut are facing charges of insider trading.
Company spokesperson Suzanne DuLong declined to comment on the legal cases, but attributed the structural changes to the leadership of Brian Kelley, who joined GMCR as president and CEO in December 2012.
‘Whenever you bring on a new leader, there is the likelihood that changes may follow,’ DuLong said. She said consolidation of GMCR’s specialty coffee and Keurig business units reflects the single system the two segments have formed since the coffee wholesaler’s acquisition of Keurig in 2006.
Management changes
As the specialty coffee and Keurig units have been dismantled and stitched back together as a single ‘domestic’ unit, GMCR quietly announced the departures of both segments’ presidents. Scott McCreary retired in May; he formerly headed the specialty coffee unit. Keurig president Michelle Stacy will leave by the end of September. Stacy’s exit comes less than five months after she stepped up to head the new U.S. commercial unit, according to SEC filings.
In June, GMCR expanded its board from 10 to 13 directors. John Hayes, Robert Steele and Susan Saltzbart Kilsby were appointed and will stand for elections in 2014, 2015 and 2016, respectively.
June also saw the retirement of Robert Stiller, who founded GMCR in 1981, and former president and CEO Lawrence Blanford. Both Stiller and Blanford agreed to serve in advisory positions with the company for periods immediately following their departures from the board.
Some new management staff also have joined the firm. Bob Ostryniec, formerly of H.J. Heinz company, took the title of Chief Product Supply Officer in late August. Lori Tauber Marcus started Sept. 9 as head of the brand and product marketing division.
Re-evaluating profitability
Aside from reshuffling GMCR’s corporate structure, Kelley also adopted a new lens for evaluating the company’s profitability, according to quarterly SEC filings. DuLong wouldn’t comment on the motivation for the shift, but acknowledged that the company’s reporting has changed to reflect his new focus.
Each business segment’s profitability used to be assessed by pre-tax income. In other words: How much the company has made after all the supplies are bought, payroll met and bills paid ‘ but before tax obligations are met. Now, GMCR is reporting the ‘operating income’ of its domestic and Canadian business segments: revenue minus the cost of goods sold, without taking administrative or other expenses into account.
GMCR previously came under criticism from some shareholders and market watchers for changing the way it reports its actual sales (rather than revenue). The company stopped announcing the number of units it sold and started publicizing only the dollar figure. This has led to widespread speculation that drew recent attention in national media.
DuLong said that switch was a function of changing product lines. As the company prepared to release new K-cup products of different sizes, in addition to other Keurig systems that required use of two portion packs to create cafe-like drinks, ‘assessment of what constituted a unit would become increasingly more complicated’ and total sales would offer a more consistent metric, she said.
Structural and product changes
But Green Mountain Coffee Roasters is no longer just about coffee. Campbell’s Soup has now joined the Keurig bandwagon. The company announced early in September that K-cup-style soup packets will be produced ‘to prepare with the touch of a button.’ The soup snacks are being marketed as just that ‘ snacks, rather than meals.
A less expansive announcement was made just a day later, when GMCR informed employees at its Toronto production facility that it would be closed to consolidate operations in Montreal.