Keurig Green Mountain Inc NASDAQ GMCR 17 March

Keurig Green Mountain Inc. (NASDAQ: GMCR) 17 March 2014 Saad Hirani | David Liang 1

AGENDA Ø Industry Analysis Ø Company Fundamentals Ø Chart Analysis Ø Competitors Ø Competitive Analysis Ø Entry strategy 2

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary INDUSTRY ANALYSIS - COFFEE RETAIL AND PRODUCTION Overview Stable Consumption Ø World’s second most sought-after commodity Ø Valued at $100 billion worldwide Addressable Market Ø 107 million people in the United States drink coffee at an average of 3. 5 cups per day Ø 2010 retail coffee industry was $30$32 billion in the United States Ø Inexpensive luxury good Ø Coffee consumption very resistant price swings Coffee retail and production industry has a huge addressable market with stable consumption. 3

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary COMPANY ANALYSIS –KEURIG GREEN MOUNTAIN Company Overview Ø Coffee producer and coffee brewer manufacturer in USA and Canada Ø Forms: whole bean, ground coffee, single-serve portion packages Ø Keurig single-cup brewers and single-serve portion packs Ø (92% of net sales in 2013) 39% Value Proposition Ø Instant coffee with consistent quality Ø Less than 3 minutes Ø Over 290 selections Keurig Green Mountain is a coffee producer (traditional and single-serve packaging) and manufacturer of the Keurig single-serve coffee brewers. 4

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary COMPANY ANALYSIS –KEURIG GREEN MOUNTAIN Business Model Ø Razor blade and razor model Ø Sell brewer at cost Ø Sell K-cups at high margin Ø K-cup variety sold through: Ø Own brands (Tully’s, Van Houtte, Timothy’s) Ø Licensed brands (Starbucks, Dunkin’ Donuts, Tazo, Folgers) Ø Generic brands Keurig Green Mountain FY 2013 Net [PERCEN Sales Contributors TAGE] [PERCEN TAGE] K-Cup Brewer Traditional coffee Keurig Green Mountain is a coffee producer (traditional and single-serve packaging) and manufacturer of the Keurig single-serve coffee brewers. 5

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary COMPANY FUNDAMENTALS Essential Statistics Highlights Ø Ø Market Cap: $16. 86 bn Ø $33. 3 bn (KRFT) $169. 4 bn (NESM) Ø Ø P/E: 33. 6 (Industry average: 17. 7) Ø Forward P/E: 25. 4 Ø Ø ROIC: 16. 6% 2012 Year 4000 3500 3000 2500 2000 1500 1000 500 0 2010 30% 25% 20% 15% 10% 5% 2011 2012 0% 2013 Debt-to-assets ratio (%) 20. 00 18. 00 16. 00 14. 00 12. 00 10. 00 8. 00 6. 00 4. 00 2. 00 0. 00 2013 Assets and Debt (mm) 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2011 Total Assets, Total Debt, Debt to Assets Ratio Operating Margin (%) Revenue (Millions) Revenue and Operating Margins Gross profit grew 40% (2012) and 27% (2013) Record high 5. 1 mm Keurig machines sold in 2014 Q 1 Debt-to-assets decrease form 24% (2010 to 4% (2013) Year Keuring Green Mountain has seen consistently growing revenues and operating margins. A decreasing debt-to-assets ratio means a lower leveraged position 6

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary CHART ANALYSIS Source: Google Finance 7

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary COMPETITORS Main Competitors Ø Nestle (Nespresso) Ø Kraft Foods (Tassimo) Ø Starbucks Corp. (Verismo) Competitive Advantage Generic-Brand K-Cups Ø Keurig Green Mountain’s patent on K-cups expired in 2012 Ø Generic K-cups entry into market Ø Minimal impact Ø Green Mountain’s coffee brands grew 34% while K-Cup industry grew 38% Ø ROIC grew from 13% (2012) to 17% (2013) Ø Lower cost in Keurig brewer price Ø Lowest starting price Ø Largest variety of coffee options offered in K-Cups Ø Both Keurig Green Mountain brands and from generic brands Ø 2014 Single-serve brand of the year Keurig Green Mountain is the strongest competitor in the single-serve coffee industry due to the lower price range of its brewers and its offering of the largest variety of coffee. 8

Industry Analysis | Company Fundamentals | Charts | Competitors | Summary SUMMARY Catalysts Ø Growth of single-serve coffee industry Entry Strategy Ø Buy GMCR when stock price drops below $100. 00 Ø Current price: $115. 56 Ø Hold into Q 2 earnings report on May 7, 2014 Ø Single-serve coffee has 30% of coffee industry dollar share 2 Ø Up from 8% in 2011 Keurig Green Mountain is the company best positioned to benefit from the shift from traditional automatic drip coffee makers to single-serve coffee. 9