Tempest in a K-Cup: Red Flags on Green Mountain
32 Pages Posted: 22 Aug 2015 Last revised: 6 Oct 2016
Date Written: May 27, 2015
“Tempest in a K-Cup” discusses financial accounting and financial statement analysis in the context of Green Mountain Coffee Roasters. The case begins with background on the evolution of Keurig and Green Mountain. Next it discusses the rapid growth of Green Mountain and its step-wise acquisition of Keurig. The case focuses on events in 2011-2012, a period in which Green Mountain experienced significant stock price volatility, was challenged by the SEC about its financial disclosures and business relationships, and endured a public bashing by a well-known hedge-fund manager, David Einhorn of Greenlight Capital.
Students completing the case gain a better appreciation for the level of scrutiny that financial statements receive from regulators, investors, and journalists. Specific topics include the use of trend analysis, ratio analysis, and free cash flows in analyzing a company’s prospects, the risk of channel-stuffing, and the role of short-sellers in capital markets. The case requires students to critically read, analyze and apply accounting guidance with respect to sales returns, related party transactions, and segment reporting. The case also requires students to read and analyze communications between the Securities and Exchange Commission (SEC) and Green Mountain.
Keywords: Keurig Green Mountain, K-Cup, short selling, channel stuffing, razor/razor-blade pricing strategy
JEL Classification: I29, K22
Suggested Citation: Suggested Citation