WATERBURY, VT. — When Green Mountain Coffee Roasters’ patents on its K-Cup portion packs ran out in 2012, the question surrounding the company was how would it protect its market share? The Keurig 2.0 is the company’s answer.
“Over the next 12 months, we will launch a new lineup of hot system brewers that deliver breakthrough benefits for the consumer,” said Brian Kelley, president and chief executive officer of G.M.C.R., during a conference call with financial analysts on Nov. 20. “We also will launch portion packs that include an interactive readability that will deliver the full extent of the breakthrough consumer benefits coming with our next generation of Keurig 2.0 brewers.”
Mr. Kelley said that in an effort to ensure the consistent quality of G.M.C.R.’s products, the new system will not work with K-Cups produced by unlicensed manufacturers.
“All of our 35-plus owned, licensed, partnered, and private label brands that exist today in our Keurig system will continue to be offered in our Keurig 2.0 system, and as we stated, we are actively engaged in discussions with a large number of unlicensed players to welcome them into the system,” Mr. Kelley said. “As part of the same Keurig 2.0 launch, we will be transitioning our lineup of Keurig brewers over fiscal 2014 and early 2015.
“Ultimately, within about a year of its launch, Keurig 2.0 will replace our current lineup of both K-Cup and Vue brewers at consumer friendly price points. This is a very important distinction between 2.0 and the Vue launch, and we’re confident that our Keurig 2.0 brewers will fundamentally improve and transform the Keurig brewing system for our current and new consumers.”
Following the expiration of G.M.C.R.’s K-Cup patents, unlicensed competitors entered the market offering products suitable for use in Keurig 1.0 brewers and at price points 15% to 25% lower than licensed K-Cup brands.
“In total, for the full year, across all U.S. channels, we estimate that unlicensed packs achieved 8% share of the Keurig platform, and we estimate that share climbed to 12% by the end of our fourth quarter,” Mr. Kelley said. “We expect unlicensed share of the system to continue to grow through the first half of fiscal year 2014 and then begin to decline in the second half and thereafter.”
A challenge facing G.M.C.R. is getting the approximately 16 million consumers who have purchased Keurig 1.0 systems during the past two years to upgrade to the new system.
“The job of innovation is to give the consumers something better than they have today and do it at a value,” Mr. Kelley said. “So we think that what we’re going to give them with the Keurig 2.0 is not only what they have today but much more, and (we’re) going to do it at value pricing that they’re used to today.”
Mr. Kelley did note that even with the new system a “K-Cup will be a K-Cup” and the company does not anticipate much of a cost difference.
“There will be some other options consumers can have, and I think that’s all we should say,” he told the financial analysts.
Mr. Kelley made his comments in conjunction with the release of G.M.C.R.’s financial results for fiscal year 2013. For the year ended Sept. 28, the company earned $483.2 million, equal to $3.16 per share on the common stock. Compared to fiscal 2012, G.M.C.R.’s net income and earnings per share rose 33% and 39%, respectively.Sales for the year increased 13% to $4,358.1 million.