In this lesson we will study Keurig, the maker of the beverage brewing system for home and commercial use. As you read idenitfy the Business Model Canvas building blocks. i

Keurig /ˈkjʊərɪɡ/, is a beverage brewing system for home and commercial use. It is manufactured by the American company Keurig Green Mountain, which is headquartered in Waterbury, Vermont. The main Keurig products are: K-Cup pods, which are single-serve coffee containers; other beverage pods; and the proprietary machines that brew the beverages in these pods.

“From Keurig’s founding in 1992 until their departure in 1997, Sylvan and Dragone hacked together prototype after prototype, working in small offices in Waltham and doing most of the taste-testing themselves. For the first few years, they drew no salary and were turned down for funding by scores of venture capitalists.” retrieved from: Boston Globe - The Buzz Machine Author, Daniel McGinn (August 7, 2011)

It launched its first brewers and K-Cup pods in 1998, targeting the office market. As the single-cup brewing system gained popularity, brewers for home use were added in 2004. In 2006 the publicly traded Vermont-based specialty-coffee company Green Mountain Coffee Roasters acquired Keurig, sparking rapid growth for both companies. In 2012 Keurig's main patent on its K-Cup pods expired, leading to new product launches, including brewer models that only accept pods from Keurig brands. Keurig has also entered the cold-beverage market with Brew Over Ice, and with Keurig Kold, which launched in September 2015; and it entered the soup market with a line of Campbell's Soup K-Cups which also launched in September 2015.

From 2006 to 2014 Keurig, Inc. was a wholly owned subsidiary of Green Mountain Coffee Roasters. When Green Mountain Coffee Roasters changed its name to Keurig Green Mountain in March 2014, Keurig ceased to be a separate business unit and subsidiary, and instead became Keurig Green Mountain's main brand. In December 2015 it was announced that Keurig Green Mountain would be sold to an investor group led by private-equity firm JAB Holding Company for nearly $14 billion; the acquisition was completed in March 2016.

Keurig founders John Sylvan and Peter Dragone had been college roommates at Colby College in Maine in the late 1970s. In the early 1990s Sylvan, a tinkerer, had quit his tech job in Massachusetts, and wanted to solve the commonplace problem of office coffee – a full pot of brewed coffee which sits and grows bitter, dense, and stale – by creating a single-serving pod of coffee grounds and a machine that would brew it. Living in Greater Boston, he went through extensive trial and error trying to create a pod and a brewing machine. By 1992, to help create a business plan, he brought in Dragone, then working as director of finance for Chiquita, as a partner. They founded the company in 1992, calling it Keurig; Sylvan later said that the name came from his having "looked up the word excellence in Dutch”.

By 1993 Sylvan and Dragone were still making the pods by hand, and brought in manufacturing consultant Dick Sweeney to serve as co-founder and to automate the manufacturing process. The prototype brewing machines were also a work in progress and unreliable, and the company needed funds for development. That year, they approached what was then Green Mountain Coffee Roasters, and the specialty coffee company first invested in Keurig at that time. Keurig needed sizeable venture capital; and after pitching to numerous potential investors the three partners finally obtained $50,000 from Minneapolis-based investor Food Fund in 1994, and later the Cambridge-based fund MDT Advisers contributed $1,000,000. In 1995 Larry Kernan, a principal at MDT Advisers, became Chairman of Keurig, a position he retained through 2002. Sylvan did not work well with the new investors, and in 1997 he was forced out, selling his stake in the company for $50,000. Dragone left a few months later but decided to retain his stake. Sweeney stayed on as the company’s vice president of engineering.

In 1997, Green Mountain Coffee Roasters became the first roaster to offer its coffee in the Keurig "K-Cup" pod for the newly market-ready Keurig Single-Cup Brewing System, and in 1998 Keurig delivered its first brewing system, the B2000, designed for offices. Distribution began in New York and New England. The target market at that time was still office use, and Keurig hoped to capture some of Starbucks' market. To satisfy brand loyalty and individual tastes, Keurig found and enlisted a variety of regionally known coffee brands that catered to various flavor preferences. The first of these was Green Mountain Coffee Roasters. Keurig also partnered with a variety of established national U.S. coffee brands for K-Cup varieties, and in 2000 the company also branched out the beverage offerings in its K-Cup pods to include hot chocolate and a variety of teas. The brewing machines were large, and hooked up to an office's water supply; Keurig sold them to local coffee distributors, who installed them in offices for little or no money, relying on the K-Cups for profits.

In 2002, Keurig sold 10,000 commercial brewers. Consumer demand for a home-use brewer version increased, but manufacturing a model small enough to fit on a kitchen counter, and making them inexpensively enough to be affordable to consumers, took time. Office models were profitable because the profits came from the high-margin K-Cups, and one office might go through up to hundreds of those a day.

By 2004, Keurig had a prototype ready for home use, but so did large corporate competitors like Salton, Sara Lee, and Procter & Gamble, which introduced their own single-serve brewers and pods. Keurig capitalized on the increased awareness of the concept, and sent representatives into stores to do live demonstrations of its B100 home brewer and give out free samples. Keurig and K-Cups quickly became the dominant brand of home brewers and single-serve pods.

The company's flagship products, Keurig K-Cup brewing systems, are designed to brew a single cup of coffee, tea, hot chocolate, or other hot beverage. The grounds are in a single-serve coffee container, called a "K-Cup" pod, consisting of a plastic cup, aluminum lid, and filter. Each K-Cup pod is filled with coffee grounds, tea leaves, cocoa powder, fruit powder, or other contents, and is nitrogen flushed, sealed for freshness, and impermeable to oxygen, light, and moisture. The machines brew the K-Cup beverage by piercing the foil seal with a spray nozzle, while piercing the bottom of the plastic pod with a discharge nozzle. Grounds contained inside the K-Cup pod are in a paper filter. Hot water is forced under pressure through the K-Cup pod, passing through the grounds and through the filter. A brewing temperature of 192 °F (89 °C) is the default setting, with some models permitting users to adjust the temperature downward by five degrees.

“Keurig Green Mountain Inc. is pulling the plug on its countertop soda machine after launching it amid great fanfare last year but failing to win over consumers.”

“On Tuesday, the maker of coffee machines and K-cups said it is discontinuing Kold, its pod-based appliance that allowed users to make chilled Coca-Cola, Dr Pepper and other carbonated beverages at home. Keurig had high hopes of making Kold a kitchen fixture—much like its popular coffee makers that took American households by storm the last decade. Coca-Cola Co. Chief Executive Muhtar Kent called Kold “a real game-changing’’ innovation in early 2014, when the soda giant took a minority stake in Keurig and agreed to make its brands available. Instead, Waterbury, Vt.-based Keurig sold only a few thousand machines after launching Kold in the U.S. last September. A store rollout faltered and in April the company said the machines would only be sold online. Many consumers balked at the price of the machine, which initially cost $369. The pods also were pricey, costing $1.25 to make an 8-ounce drink. And the machine took up a lot of counter space and about 60 seconds to make a single serving—much longer than it takes to grab a ready-made bottle or can of Coke from the fridge.”

“Underscoring Kold’s struggles, Keurig recently offered the machines for as little as $199 and slashed the price of pods to 50 cents, to no avail. “While it delivered a great-tasting cold beverage, the initial execution didn’t fully deliver on consumer expectations, especially around size, speed and value,’’ said Suzanne DuLong, a Keurig spokeswoman.”

“ ‘People today, even though they talk about make my own, if it takes 45 seconds to make a Pepsi at home as opposed to three seconds to pop open a can, they think that’s 42 seconds wasted,’ PepsiCo Chief Executive Indra Nooyi told a soda-industry conference in late 2014.”

 

from reference: WSJ Keurig-discontinues-cold-drink-carbonation-machine-after-sales-fizzle Author, Daniel McGinn August 7, 2011