With Green Mountain coffee, Yelp, and man other big consumer companies being the focus of the news today, it got my little brain churning. Many of us think about investing as finding a quality company, with good earnings and growth potential. Though the key to investing, after looking at the news today, is merely the tracking of consumer trends. Since the society we live in today focuses on consumers, selling goods, selling goods on websites, selling directions to those goods, and on and on; it is fair to assume that our society is based around consumer trends. To make the most out of investing we must delve into those consumer trends.
Green Mountain is a perfect example and very fresh in everyone’s minds. Why do people by Green Mountain products? Well gosh Young Gun, that’s an easy one, everyone in America likes have a single serve coffee machine at home. Evaluating that answer, the average investors answer, we already see it in the terms of consumer trends. Green Mountain has pioneered the consumer trend of single serve coffee, they have not made one of a kind product that can stand the test of time. It is quite easy for someone like Starbucks or Walmart to come in and sweep away consumers. The market for Green mountain is there merely due to this consumer trend, not brand loyalty.
Let’s contrast this to a giant, to get the best understanding of my point. Ask yourself, why do people love Apple products? Again this answer should be easy, everyone in America loves iPhones. Now notice the contrast here from my previous paragraph, did I saw smartphone? Now you get the drift. Apple is pioneering the consumer trend and extrapolating brand loyalty through the consumer trend. No one can or will make a iPhone like Apple and no one has been able to make a smartphone quite like it. That is why so many consumers and phone companies are willing to pay a premium for the product.
My point is obvious, without brand loyalty that captures a consumer trend, you as a company have nothing. Just ask Netflix. If the consumer trend is single serve coffee and I can get the same coffee and maker at Walmart, Green Mountain isn’t much of a mountain anymore.