Keurig alters its strategy

In a major about-face, Keurig Green Mountain says it was wrong to prevent users from brewing their own coffee and trying to steer them only to Keurig-licensed single-serving pods.

It’s bringing back the My K-Cup reusable filter and will license more outside brands.

The Waterbury-based company reversed field because consumers objected strongly to limiting the coffee options, and sales of the Keurig 2.0 brewing system plunged. The company’s stock also dropped, as revenues fell below market expectations.

Keurig’s 2.0 brewer can brew full carafes as well as single cups, but it includes software that accepts only coffee pods licensed by Keurig.

The system uses a digital scanner that looks for an ink marker on authorized K-cups. The company also discontinued its My K-Cup reusable pod, which meant customers could no longer use their own coffee in a Keurig.

From a revenue standpoint, the move made sense; unlicensed pod makers had captured 14 percent of the $3.7 billion K-Cup marked by mid-2014. Keurig wanted to regain some of that ground.

From a consumer standpoint, the move limited customer choice, and coffee drinkers got upset.

In addition, the Keurig 2.0 limitation can be easily bypassed; all it takes is an Internet search to learn how.

Overall, the company had little to lose by opening the doors to unlicensed pods and reusable K-Cups.

CEO Brian Kelley said during the company’s second-quarter earnings call that brewer sales were lower than expected, inventory built up on the balance sheet, and the new, limiting technology contributed to the problem.

Although Keurig’s total revenue was up 2 percent for the second quarter, the company’s sales of brewers and accessories were down 23 percent. While pod sales were up 14 percent, Keurig Chief Financial Officer Fran Rathke said less coffee was shipped than expected because of a “somewhat higher than expected consumer price elasticity at retail.”

Kelley said the company was moving quickly to incorporate formerly unlicensed pod brands so that the coffee makers will work with “more than 500 varieties across more than 70 brands,” rather than just Keurig-licensed pods.

“We heard loud and clear from the consumer, while a very small percent of consumers, a very vocal and intense, passionate consumer who really wanted the My K-cup back,” Kelley said. “What we learned is … that we want consumers to be able to brew every brand, any brand of coffee in their machine and bringing the My K-cup back allows that. We took the My K-cup away and quite honestly we’re wrong.”

“We underestimated the passion that consumers had for this. … We shouldn’t have taken it away, we did. We are bringing it back.”

Kelley said the My K-Cup filter will be available for Keurig 2.0 in time for the holidays.



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