Keurig Coffee Case

Keurig Coffee

For many, waking up every morning may consist of taking a shower. For others, a morning can be spent getting the children ready for school and after going to work. Some even drink coffee as a morning ritual. A consumer survey done by the National Coffee Association reported that the percentage of people that drank gourmet coffee increased from 14 percent in 2007 to 17 percent in 2008.

Keurig Coffee was founded on the idea that consumers should be able to brew and enjoy one cup of coffee at a time. Gourmet coffee shops much like Starbucks began to form and consumers began spending their money on one cup of coffee. Keurig initially focused on the "away-from-home" market segment of office users. With this change in consumer behavior, Keurig's strategy of one-cup, gourmet coffee in offices took root in 1998.

The development of the first at home brewing machine was launched in February of 2003 prior to the releasing of the brewer by shareholder Green Mountain Coffee Roasters Inc.(GMCR) When launching their commercial brewer, they offered eight types of coffees. Later Keurig launched a variety of teas. There were many concerns of Green Mountain Coffee Roasters as well as GMRC and problems with pricing as well as marketing issues. This paper will provide alternatives and recommendations to these dilemmas.

After analyzing these strategies Keurig had set forth, it is assumed that Keurig is outsourcing the manufacturing of their brewers, acquired the design and manufacturing costs of the "K-Cup" and brewer, and has done market testing and surveys for consumer feedback which proved to reflect current feelings.

Some of the strengths of the one-cup approach with the brewer allowed quick entry in the "at-home" market before competition. GMCR feels that the one-cup approach is simpler, and economical for the roaster and consumers. Unlike the two-cup approach with the brewer, there was less customer confusion about which cup went with which brewer. Weaknesses of the one-cup approach are the isolation of the OCS(Office Coffee Services) K- Cup channel and decrease in control of the pricing with KADs. Keurig has opportunities due to their ability to enter the market and have ample time to create a smaller and cost efficient brewer as well as entering retail markets due to less overall costs.

Concerns included the complication of the two-cup approach and management expressed the need to keep the one-cup based on desire of "long-term simplicity" and its ability to move into the one-cup, at-home market. Fear in the OCS market come from employees owning the at-home Keurig system and being enticed to steal the K-Cups from the office supply. This is a strong argument behind using the universal K-Cup.

Other concerns include pricing issues. It is evident that coffee drinkers