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Keurig Green Mountain Whisper

Keurig Green Mountain Whisper
 

Research Question: Can Keurig Green Mountain successfully consolidate market share through the development of its Keurig 2.0?

Companies Covered: Keurig Green Mountain (GMCR)

Report Available: April 10, 2014

 

Blueshift’s initial research indicates Keurig Green Mountain taking steps to consolidate the K-Cup marketplace with a new brewer, despite facing competition from private label manufacturers.

 

Observations

  1. After the expiration of key patents in 2012 opened the floodgates to cheaper private label competitors in the K-Cup marketplace, Green Mountain has faced mounting concerns about its declining earnings power due to the company’s “Blade and Razor” business model. To combat this rise of private label K-Cups, Green Mountain has tried to take over manufacturing of certain unlicensed brands due to the growing popularity of private label brands, like Kraft and Peet’s, which have grown their market share from 7% half way through 2013 to 14% by the end of the year.
  2. In response to the growing popularity of unlicensed brands, Green Mountain has developed a more advanced Keurig machine, Keurig 2.0, designed to distinguish between Green Mountain K-Cups and unauthorized private label brands through proprietary technology designed to be “the physical equivalent to DRM.” This new technology has the potential to consolidate Green Mountain’s holds on the K-Cup marketplace and drive the profitability of the company, while curtailing the growth of private labels. In direct competition to the new Keurig 2.0, Nestle’s Nespresso launched a bigger single-serve coffee brewer in the U.S. and Canada markets, called the VertuoLine system.
  3. In Blueshift’s Oct. 2013 report, we found that Peet’s was highly unlikely to partner with Green Mountain on a licensed K-Cup agreement. Kraft appeared more open to a partnership with Green Mountain, in case its unlicensed K-Cup route does not work out. Smaller private labels were willing to consider partnering with Green Mountain but only under terms that are favorable and similar to their current relationships or to Green Mountain’s arrangement with Costco, which they did not expect. Twelve of 23 sources, including seven private-label executives, said private-label sales increased since Blueshift Research’s July 2013 report and year-to-year. Sources said private labels are taking share directly but not significantly from Green Mountain. They also said Green Mountain’s upcoming anticounterfeiting brewer would only make customers and the grocery channel angry, and would likely backfire. It also may prompt some private-label manufacturers and stores with their own K-Cup brands to switch to other platforms, and may give private labels a clear shot at supplying product to Keurig owners who will not upgrade to the new brewer.

 

To gain insight on the adoption of Keurig 2.0 and how private label brands will respond to it, Blueshift will gather data and issue a market research report from independent sources in the following areas: private label manufactures, private-label buyers for grocery stores, grocery store staff and management, online distributors, office supply channel, consumers, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.