Consumer Products

Keurig's New Technology Can't Keep Pirates at Bay

Keurig 2.0
Source: Keurig Green Mountain Inc.
When Keurig Green Mountain Inc. (NASDAQ: GMCR) lost patent protection on its single-serving coffee pods a couple of years ago, the company’s stock took a beating as competitors wheeled out knock-offs of the proprietary K-cup pods. Keurig is trying to beat back the challenge partly by introducing a new, larger K-Carafe 30-ounce pod to go with a new larger machine, the Keurig 2.0. The company said that it would use a special ink to print the top of the new pods to combat knock-off pods from stealing its business.

It was a nice try, but it does not appear to have worked. The CEO of Treehouse Foods Inc. (NYSE: THS), the largest of the private-label companies that produce pods for the original Keurig machine, said in June that it would take “months, not years” to replicate Keurig’s technology.

It apparently took less than three months, and it was another Keurig competitor, Mother Parkers Tea & Coffee, that announced it will launch a new version of its own pods that are compatible with the Keurig 2.0 brewing machine.

About 14% of the market for single-serving pods is made up of Keurig competitors. The total global market size for single-serving coffee pods is around $9 billion and margins are extremely rich. A pound of coffee that sells at retail for about $13 could be split into pods and retail for more than $50. The convenience of a pod is worth $37 a pound? Go figure.

Keurig Green Mountain’s shares traded up about 0.3% at noon on Friday in a 52-week range of $56.87 to $136.91.

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