The much-anticipated ‘Keurig 2.0’ single-cup brewing system with ‘interactive readability’ (that doesn’t work with unlicensed/copycat pods) will offer such “game-changing functionality” that consumers - and unlicensed players - will want to switch, claims the boss of Keurig-maker Green Mountain Coffee Roasters (GMCR).
Speaking on the firm’s fourth quarter 2013 earnings call, CEO and president Brian Kelley said: “We will be transitioning our lineup of Keurig brewers over fiscal 2014 and early 2015. While we're still not willing to discuss specifics about the platform for competitive reasons, we are confident it delivers game-changing performance.
“To ensure the system delivers on the promise of excellent quality beverages produced simply and consistently every brew every time, we use interactive technology to help us perfectly brew all Keurig brew packs. Because of this the system will not brew unlicensed packs.”
The new Keurig 2.0 system will not brew unlicensed packs
Now that K-Cups are off patent, anyone can make them, and unlicensed versions (which sell for 15-25% less) accounted for a record 12% of sales of single-serve coffee/tea for Keurig machines in the quarter, he said.
But that would change in time, he predicted: “We will continue to convert current unlicensed players into licensed Keurig system partners, so that they can participate in the innovations ahead… GMCR is actively engaged in discussions with a large number of unlicensed players to welcome them into the [new 2.0] system…”
We anticipate a large number of current Keurig users choosing to switch into the new system
Asked why he believed consumers that have already bought a Keurig machine might switch to the new 2.0 platform, he said: “We anticipate a large number of current Keurig users choosing to switch into the new system because it's a better one.
“And any time new technology comes out and it's a better technology and you already love the brand and you offer a better product you generally get consumers to switch… We’re pretty confident as we’ve begun to talk to customers about this.”
Meanwhile, the new commercial grade Keurig BOLT machines and packs (which can brew a 64 oz. pot of coffee in two minutes) have performed well in test markets, while the new Keurig Cold system (that will make freshly prepared carbonated, sparkling and still beverages) would launch in fiscal 2015, he said.
“The response [to BOLT] from our offices and from our distributors has been excellent… We expect the BOLT to play a big part in offices and large offices and midsized offices.”
New ‘fresh brewed’ Campbell Soup K-Cup products would also hit shelves next year, he said (click here ).
GMCR 2013 revenues $4.4bn; Keurig machines in estimated 13% of US households
GMCR posted a 22% rise in revenues to $1bn in the fourth quarter of fiscal 2013 (13 weeks ended Sept 28) with volumes of portion packs up 29% and sales of Keurig machines up 47%.
For the year, net revenues were up 13% to $4.36bn and EBITDA was nearly $1bn, said Kelley, adding: “We estimate our current Keurig Hot system is in approximately 13% of US households.”
Well Fargo: Pods account for more than a third of dollar sales of retail packaged coffee
According to a Wells Fargo analysis of the latest Nielsen expanded all-outlet combined channel (XAOC) data (all stores except c-stores), pods now account for more than a third of dollar sales of retail packaged coffee.
And private label pods accounted for 8.7% of dollar sales of pods in October 2013 compared with 0.4% in October 2012, said senior analyst Bonnie Herzog: "Private label pods’ pricing increased 2.3%, however PL pods continue to capture unit share of the category."
She added: "Investors have been asking us what the availability of private label K-Cups could mean to the category and we feel private label will likely drive growth to the entire pod category and should not meaningfully affect premium/super-premium K-Cup brands’ momentum."