Green Mountain appoints product-savvy Coke executive as CEO
November 21, 2012 4:14 AM EST
Green Mountain Coffee Roasters Inc
Kelley replaces Lawrence Blanford, who over five years grew Green Mountain from a little-known Vermont-based coffee maker to one of the fastest-growing U.S. companies, but whose reputation has been diminished recently by sales misses and questions about the company's business model and accounting practices.
Green Mountain's market value has increased five-fold since Blanford, 58, took over from founder Robert Stiller in 2007, but the stock is down more than 40 percent this year.
The company's shares rose as much as 11 percent to $30.23 in trading on the Nasdaq on Tuesday.
Kelley, 51, brings a wealth of experience to Green Mountain, especially in areas where the company has had problems, such as product and supply chain management, analysts said.
"We view the announcement favorably as Kelley's operations experience at Coke is an area of considerable weakness at Green Mountain," Stifel Nicolaus analyst Mark Astrachan said in a note.
Green Mountain's growth prospects have moderated since some of the company's patents related to the design of its K-Cup refills used in its Keurig brewer expired in September, paving the way for a wave of new competition from the likes of Starbucks Inc
The company, which short-seller David Einhorn last year accused of inflating sales figures, is also the target of a Securities and Exchange Commission inquiry into accounting and revenue-recognition practices related to its dealings with Chicago-based distributor M. Block & Sons.
NEW LEASE OF LIFE
SunTrust Robinson Humphrey analyst William Chappell Jr., said the new CEO offers the chance for a new lease of life for Green Mountain.
"While there have been new entrants (notably Starbucks) into the brewer category in the past few months, we believe that the market is still relatively underpenetrated," Chappell said in a client note.
Kelley's appointment, effective December 3, ends an almost eight-month search since Blanford told the board in February that he planned to retire.
Kelley will receive an annual base salary of $900,000 and signing bonus of $600,000, the company said in a regulatory filing. He is also eligible for an annual cash bonus with a target of 100 percent of his base salary.
Kelley has been the chief product supply officer for Coca-Cola Refreshments, the unit that represents most of the company's North American business, since October 2010. He was slated to take over as president of the unit next January.
Glen Walter will take over as president of Coca-Cola Refreshments, the company said in an internal memo.
John Sicher, editor of Beverage Digest, said that while Kelley was a talented executive, Walter would be a strong replacement. "Coke won't miss a beat," Sicher said.
Green Mountain shares were up 7 percent at $29.25 in late morning trading. The stock hit a year high of $71.15 in February.
(Reporting by Siddharth Cavale in Bangalore and Martinne Geller in New York; Editing by Saumyadeb Chakrabarty and Ted Kerr)