Keurig Coffee Case

Keurig Coffee Case

KEL021 February 28, 2005

ERIC T. ANDERSON

Keurig At Home:
Managing a New Product Launch
A Wednesday afternoon in February 2003 found Keurig Inc.’s president and CEO Nick Lazaris heading south on Interstate 89 back toward his Wakefield, Massachusetts, office and mulling over the day’s events in preparation for a briefing with his senior management team (see Exhibit 1). He realized that the next two weeks would be critical to the success of the company’s newest product initiative in the single-cup coffee market. Lazaris had just wrapped up a presentation to the Green Mountain Coffee Roasters Inc. (GMCR) management team, one of the company’s strategic partners and an investor in its business. While reviewing the company’s progress toward the launch of its innovative coffee-brewing system into the at-home consumer market, GMCR had asked Keurig to reconsider its decision to use a different version of the coffee portion pack, known as a K-Cup, in the consumer market. In making its request, GMCR had offered a number of compelling reasons for using the existing commercial portion pack in both channels. As he drove, Lazaris passed a new Starbucks and reflected on how gourmet coffeehouses had helped pave the way for Keurig’s single-serve brewing system. The proliferation of soft drinks since the 1960s had caused coffee to lose its place as a central component of social gatherings, spurring a precipitous drop in coffee consumption to an all-time low of 6.1 pounds per capita in the mid-1990s from a peak of 16.5 pounds per capita in the mid-1940s.1 The entrance of gourmet coffeehouses had reinvigorated the market, developing a distinct subculture of coffee drinkers and educating younger consumers about great traditional coffees as well as espresso and milkbased specialty beverages. As a result, by 2003 an estimated twenty million Americans were drinking gourmet coffee on a daily basis. Keurig’s launch of a single-cup brewing system in the office coffee...