During its Q4 earnings call and a recent appearance at Beverage Digest’s “Future Smarts” conference in New York, Green Mountain Coffee Roasters CEO Brian Kelley spoke about the company’s intent to launch Keurig 2.0 during the next fiscal year as well as a “cold beverage platform” the following year. The cold platform will allow consumers to make soft drinks ranging from carbonates and energy drinks to iced teas and juice drinks. Specifics regarding this new system are still shrouded in secrecy, but Kelley’s comments and GMCR’s history show that the machine has enough potential to catch the eye of the soft drinks industry.
Moving Beyond Coffee
Relying on its foundation of providing consumers a “simple, convenient brewing system featuring a wide selection of brands [that delivers] a fresh cup of coffee – every time,” Green Mountain has grown into the United States’ largest coffee company in terms of retail sales due to its company owned and licensed K-Cup brands for the Keurig machine. Unhappy with simply resting on its laurels, GMCR is currently working on its next major venture: a cold beverage platform that can make a variety of soft drinks.
According to Green Mountain, 90 million of the 120 million households in the United States own a coffee maker. Of those households, 13% have a Keurig brewer. Furthermore, the company estimates that 1 to 1.5 pods are consumed per day for each machine. Yet, GMCR estimates that, on average, each household consumes fourteen daily beverage servings. By tapping into these beverage occasions, Green Mountain hopes to becomes a major player, with established retail distribution, in the US$98 billion retail soft drinks market.
All-in-One System Leverages Demand for Beverage Variety
Before Green Mountain starts to dream of a world where a Keurig machine that produces all beverages rests on every American kitchen countertop, the company must hurdle several obstacles. Given that the launch of the cold system is still some two years away, details about it are scarce. However, Brian Kelley is on record as saying that, in order for the system to succeed, 1) the beverage has to come out cold; 2) preparation time has to be at or less than 60 seconds; 3) carbonation has to be achieved without the use of a CO2 cylinder; and 4) the system has to be capable of delivering a perfect dose for each beverage/brand.
Overcoming these challenges will not be easy, and it is too early to speculate on whether Green Mountain has the technology to succeed. Taste and simplicity will be paramount to the system’s ability to gain share. If the beverages produced are lacking in taste and flavour when compared to average packaged drinks, GMCR loses the advantage that gave its coffee system such an edge, i.e., the ability to deliver a fresh, high quality beverage “every time”. Furthermore, if the machine is complicated or provides little to no convenience when compared to purchasing packaged goods, the machine is little more than an expensive SodaStream.
The soft drink world is also entirely different from US coffee culture. Most Americans are accustomed to brewing their coffee at home, as evidenced by the 90 million households that own a coffee maker. Until the launch of SodaStream (which is still niche in terms of household penetration), home “crafting” of soft drinks has been anything but premium – restricted to Kool-Aid packs and powder concentrates. Furthermore, per capita consumption of soft drinks (excluding still bottled water) has declined every year since 2002, when it peaked at 198.6 litres. That figure is down to 185.5 litres per capita in 2012, indicating that Americans are consuming less packaged flavoured soft drinks than ever before.
That said, the demand for an all-in-one machine exists. While obesity concerns, soda fatigue, and cost have all presented challenges leading to volume decline, the modern American consumer spent US$276.1 per capita on off-trade soft drinks (excluding still bottled water) in 2012; a 3.5% increase from 2002, removing the effects of inflation. Looking at soft drink categories, specifically the volume declines of carbonates and the rise of other beverages such as sports and energy drinks, flavoured/functional waters, and RTD teas, it is becoming more and more clear that today’s consumer demands more variety in their drink purchases.
Potential to Reach a New Kind of Consumer, but Questions Remain
This is where Green Mountain’s cold platform can potentially thrive, so long as its technology can meet consumer demand. Green Mountain states that there are fourteen occasions in the average US household where consumers drink a beverage. The cold system, with its ability to create such a wide variety of beverages, can cater to entire families with varying beverage preferences or even the single consumer who wants variety at home without having to stock his/her refrigerator with a dozen different bottles and cans. This system is unlikely to reach the levels of success that pods have reached (at least not for several years and not without the backing of major beverage players), but it does present a new option for consumers seeking to shake up their beverage purchases. This can particularly speak to millennials who have shown a penchant for products “on-demand” and lean toward broader trends of technology, customisation, and choice. While this consumer segment does not currently represent the mainstream, it is a growing niche that prioritises variety and convenience.
Should Green Mountain succeed in its quest to perfect home-crafted soft drinks, several questions remain that will determine whether the system will be niche or mainstream. Will one or more of the major beverage companies view Green Mountain as a partner for a new revenue stream or competition? Will brick and mortar stores embrace the system (especially since the smaller pods relieve some of the costs associated with stocking and storing of traditional packaged beverages) or will the online channel be the main benefactor? Will brand variety play as vital a role as it did in GMCR’s success with coffee pods? Will consumers embrace the technology amidst a growing sentiment for more natural and organic products? The questions surrounding the system are only beginning, but one thing is clear – GMCR has people paying attention.