In Depth

The At-Home Beverage Market Plays It Cool

Keurig Green Mountain is making a bet that its fans run cold — cold beverages, that is.

The maker of single-serve hot beverage machines has teamed up with Coca-Cola to create its first and long-awaited cold beverage model, Keurig Kold. After six years and nearly $1 billion invested in the development of the machine, the behemoth in the hot beverage market is eager to take on rivals, including SodaStream, for total dominance in the make-at-home convenience drink market.

Keurig may face an uphill image and positioning battle as stalled growth for SodaStream may suggest that interest in make-at-home carbonated beverages has flatlined. Unlike SodaStream — whose CEO cited the company’s decision to position itself as an alternative to Coke and Pepsi as “a strategic error,” as it turns out that nearly 60 percent of SodaStream users say they use their machines primarily to carbonate tap water, not adding any sugar or flavoring — Keurig is betting that the convenience and brand cache of the Coca-Cola name will make its new cold beverage machine a success. This is a gamble in a market where soda sales have experienced a 10-year decline and buying behaviors are increasingly dictated by consumers with health and wellness concerns who favor bottled water to artificially sweetened and flavored soda beverages.

The other challenge facing the Keurig Kold? Price. Launching with flavors that include Coke as well as Dr. Pepper and Canada Dry, the machines carry a hefty $369 price tag, which leaves some analysts wondering if consumers will bite. The K-Cup needed to produce an 8-ounce glass of Coke will cost $1 each, which also poses an obstacle, as a two-liter of Coke consistently sells for somewhere in the neighborhood of $2 at most retail stores. This hardly makes Keurig Kold a savings for consumers and, if the novelty factor of the make-at-home beverage isn’t high enough, consumers may find it easier to stick with feeding their current soda habits at the drive-thru or from a pre-packaged can.

However, these are all challenges Keurig has successfully navigated before to claim dominance in the hot beverage market. And while drip coffee sales have stagnated over the last few years, Keurig’s continued growth is an indication that the new cold beverage model may be a hit despite grim predictions.

Initially intended for the office, Keurig hot beverage machines are now reportedly in almost one out of three American households. In 1992, when Keurig’s inventor John Sylvan quit his day job to perfect his invention (drinking 30-40 cups of coffee a day until he perfected his system), the single-serving hot beverage market didn’t even exist. By 1997, Sylvan had sold his share of the company for $50,000, and Keurig was gaining traction.

By 2010, Keurig Green Mountain was selling 3 million K-Cups annually and projected steady growth, which they would later blow out of the water. In 2015, Keurig Green Mountain sold more than 9 billion K-Cups, greatly contributing to the company’s $4.7 billion in revenue.

But Keurig hasn’t grown without its share of controversy. The signature K-Cup flavor pods used to brew each beverage are non-recyclable and generate a huge amount of waste. With competitors offering recyclable options and a website dedicated to eradicating the highly polluting pods (complete with a doomsday video showing the horrors of the pods), as well as hashtags like #killthekcup still in wide circulation on social media, Keurig has done little to respond or pivot to growing public concern about the environmental impact of their products.

Sylvan recently sat down with The Atlantic to voice his own regret about the apparatus he brought into the world. He admits that “It’s like a cigarette for coffee, a single-serve delivery mechanism for an addictive substance.” But perhaps more profoundly he adds “I feel bad sometimes that I ever did it.”

Time will tell how Keurig’s latest invention will fare in a changing single-serving market, and whether the company ultimately regrets the Keurig Kold (beyond just the deliberate misspelling of the product).

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Financial Invisibles Report

TRENDING RIGHT NOW

To Top