Green Mountain dominates the single-serve coffee market with its popular Keurig brewers and K-Cups, the little plastic pods that now come in over 200 licensed varieties. The rise of Keurig has even prompted brands like Starbucks, Folgers, and Dunkin' Donuts to release their own K-Cups, which users insert into the Keurig each time they want a cup of coffee. But other, unlicensed companies have also been able to hop on the bandwagon thanks to crucial patents that expired in 2012. That gave competitors the opportunity to produce generic K-Cups and price them lower than Green Mountain's official line. And consumers have noticed: generic Keurig pods have seen a steady rise in popularity.
But Green Mountain wants to put a stop to that momentum. Much like your inkjet printer, refills are the real money-maker of the Keurig platform. So to ensure consumers stick with its own K-Cups moving forward, Green Mountain is implementing the physical equivalent of a DRM system with Keurig 2.0 which will start appearing on store shelves this year. Aside from offering a larger 28-ounce serving size, Keurig's next line of brewers will contain "interactive technology" designed to lock out unlicensed K-Cups. On a recent earnings call, CEO Brian Kelley insisted the change is primarily meant to "ensure the system delivers on the promise of excellent quality beverages produced simply and consistently every time."
BUYING COFFEE WILL SOON BE JUST AS ANNOYING AS BUYING PRINTER INK
It will also protect Green Mountain's multibillion-dollar K-Cup business assuming consumers see a need to upgrade their existing brewers. If not, unlicensed K-Cup pods will likely continue eating into Green Mountain's bottom line. Kelley seems confident Keurig owners will make the transition. "Any time new technology comes out and it's a better technology and you love the brand and you offer a better product, you generally get consumers to switch," he said. Before that change occurs, Green Mountain is hoping to establish working relationships with companies producing unlicensed Keurig pods. But some aren't pleased with Keurig's direction; TreeHouse Foods has already sued Green Mountain, accusing the company of anticompetitive business practices.
