While some analysts still need convincing that the much-anticipated Keurig Cold at-home carbonation system will revolutionize the soft drinks market, Keurig Green Mountain CEO Brian Kelley says he has no doubt it will prove to be “disruptive” technology.
Speaking on the firm’s second quarter earnings call this week, Kelley said: “We remain confident Keurig Cold will be a second disruptive global platform for our company that will materially expand our addressable marketplace opportunity and provide another long runway for future growth.”
Consumers feel like they're crafting their own beverage
Keurig Green Mountain has not explained how much the capsules will cost or how Keurig Cold works beyond confirming that users won’t need C02 cartridges, but said everything is in place for a commercial launch in 2015.
“We are creating a new Keurig Cold production center in Vermont, where we will start-up the first cold production lines,” he said.
“We are also in the final stages of closing on the site for the first dedicated commercial Keurig Cold production facility in the southeastern United States.”
It’s offering a different form of convenience
Asked about the appeal of the system, he said it tapped into consumer trends towards customization and would appeal to shoppers that don’t like carrying heavy multipacks of soft drinks home from the store.
”The value will be a little different than it is in the hot beverage platform,” he explained.
“It's not necessarily that we're going to bring time savings to the process of reaching in the refrigerator and grabbing a cold Coke, or a cold beverage. It's going to be able to deliver a great testing fresh beverage in a very sustainable way and do it in a way that .. consumers feel like they're crafting their own beverage.”
He added: “It [also] brings significant convenience in a different way with storage, with the ability to shop and bring it home, storage in the refrigerator, storage in the pantry and so consumers have spoken loud and clear to us about [how] they see the convenience in this, but it's a little different.”
Euromonitor International: Keurig Cold has to focus on fun and variety
So what do industry watchers say?
Jonas Feliciano, beverage industry analyst at Euromonitor International, says the fact that Coca-Cola recently took a 10% stake in Keurig did not necessarily mean it was convinced that Keurig Cold was going to be a game-changer, merely that “it wants its products to be available on all platforms and it wants a 10% stake in a profitable coffee company.”
The key to the success of Keurig Cold will be fun and variety, he told FoodNavigator-USA. “Just focusing on replicating beverages you can buy at the store would be misguided, and pricing would also be an issue, although it’s true that buying pods is easier than carry a 12-pack of Coke.
“Where it can make an impact is focusing on variety and the fun factor, as quality and convenience - what single serve coffee delivered - is not really the top selling point here.”
Keurig 2.0:’ There’s not much new functionality that really necessitates a new purchase’
So what does he make of the next-generation ‘Keurig 2.0’ hot brewing system with ‘interactive readability’ (that doesn’t work with unlicensed/copycat pods), which is set to launch later this year?
The new machines - which can brew a carafe of coffee as well as single pods, and feature technology that reads information about the inserted Keurig pack in order to brew it at the ‘optimal’ setting - will no doubt prove appealing to consumers buying their first coffee machine, predicted Feliciano.
But it remains to be seen whether the 13 million households that already have a Keurig machine will upgrade, at least in the short term, he said.
“There’s not much new functionality that really necessitates a new purchase. They call it 2.0 in the same way you think of an iPhone 4 or 5, but in reality it’s like an iPhone 4S or 5S.”
Keurig 2.0 set for holiday season launch; retailers have been ‘extraordinarily supportive’
But Kelley said he was confident the machine would be a winner, adding: “Each Keurig 2.0 brewer this holiday season will be shipped with an actual carafe and in assortment of the K-Carafe packs included in the box to encourage consumers to immediately experience and adopt our exciting new innovation.”
Retailers were also very enthusiastic, he claimed. “We have a comprehensive launch plan for our Keurig 2.0 system with in-store, point-of-purchase materials and significant marketing investment to drive awareness and traffic beginning in the fourth quarter.”
Wells Fargo: Pods now account for 41.2% of dollar sales of ground coffee in the US at retail
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 40% of dollar sales of retail packaged coffee in the US.
In the second quarter, net sales at Keurig Green Mountain rose 10% to $1.1bn - the bulk ($898.2m) coming from pods and the rest coming from brewers and accessories ($137.6m); and other products such as packaged coffee ($67.3m).
Adjusted operating income rose 21% to $271.8m.