Keurig Green Mountain capsule Coffee Machine how to use domestic capsule Coffee Machine which is good

Professional coffee knowledge exchange more coffee bean information please follow the coffee workshop (Wechat official account cafe_style)

Keurig used to be a small coffee shop in the United States that sells fine coffee. It has grown into the third largest beverage group in the United States by accurately grasping consumer tastes, an "open model" and the introduction of external capital. Let's take a look at its successful way to turn a shrimp into a big whale.

Innovation: learn from Microsoft and Android, adopt the "open model" and successfully turn small companies into big ones.

Five key points of this article: 1. Keurig's American coffee beats Nestle style and dominates the American capsule coffee market. 2. Keurig adopts the model of "platform economy" and builds its own camp with gangs. 3. Keurig sacrifices profits to sell coffee machines in order to make money from coffee capsules. four. The addition of Starbucks makes the Keurig Coffee platform more powerful. five. The crisis turned into a turning point, and Keurig introduced funds to open the financial governor's second pulse in the predicament, becoming the third largest beverage group in the United States.

1. Keurig's American coffee beats Nestle Italian style and dominates the American capsule coffee machine market.

There are many kinds of coffee brewing methods, of which the most popular with modern busy urbanites is the capsule coffee machine! Consumers do not need to spend too much time and do not need the knowledge of brewing coffee, they can brew delicious coffee at the touch of a button. Moreover, the shelf life of encapsulated coffee is longer than that of ordinary bagged coffee beans.

There are more than 50 kinds of capsule coffee machines on the market, and the first capsule coffee machine was invented by engineers from the Swiss company Nestl é in 1976. Later, Nestl é set up a subsidiary "NESPRESSO" in 1986 and began to sell capsule coffee machines on the market, and now has a global market share of about 35 per cent.

But NESPRESSO's capsule coffee maker has less than 10% of the market in the United States, because Americans like to drink American coffee with a lighter taste, while NESPRESSO sells mostly espresso, so it is not popular with American consumers. So who is the dominant seller of capsule coffee in the United States? The answer is Keurig Green Mountain, based in Vermont (alias the Green Mountain State).

Keurig Green Mountain was originally a coffee shop selling fine coffee. It was founded in 1981 as Green Mountain Coffee Roast. After merging with coffee maker Keurig in 2006, it changed its name to Keurig Green Mountain in 2014.

The Keurig Green Mountain product project includes coffee, hot cocoa, tea and other beverages. Its Keurig capsule caffeine, which focuses on American coffee flavor, is loved by American consumers and has a market share of more than 90% in the United States. But the success of Keurig capsule coffee lies not only in its taste, but also in its business model.

(photo capture: Lodgingkit.com)

2. Keurig adopts the model of "platform economy" and builds its own camp with gangs.

Comparing the business model adopted by NESPRESSO and Keurig in capsule coffee, we will find that the route is very similar to the Apple iOS system in the mobile phone market and the Android system in Google.

Apple is a closed system that ensures the quality of mobile phones and a good user experience, while Google's Android system is open so that mobile phone manufacturers can be customized at will. Therefore, there are many manufacturers who invest in the Android camp, and the application systems also have their own advantages. As a result, the global market share of Android in mobile phones is much higher than that of iOS.

NESPRESSO is also a closed system, and to open a store to ensure service quality and a good customer experience, products into a noble and elegant enjoyment. Nestl é controls almost all the value keys in the NESPRESSO system, and they handle all sales except the coffee machine is made by a third party. A premium NESPRESSO coffee maker costs NT $10,000, and coffee capsules are available in more than a dozen flavors and must be ordered from the original factory in order to maintain the extremely luxurious high-end market image.

Keurig capsule Coffee is an open system. It has signed cooperation agreements with 75 professional coffee and beverage manufacturers, including Caribou Coffee, Dunkin' Donuts, Snapple, Starbucks, and UCC Coffee, and more than 500 kinds of commodities to produce coffee, black tea, cocoa and other flavor capsules. Keurig coffee capsules, also known as K-Cup, are larger than other brands of capsules and are specially designed for the American market that prefers large cups of American coffee.

Each coffee manufacturer can load its own coffee powder into K-Cup and sell it, as long as it pays a royalty to Keurig. Consumers can drink coffee from Starbucks, UCC or other well-known coffee merchants as long as they buy a Keurig coffee machine for less than $100.

(photo capture: Keurig.com)

Because the price of Keurig coffee machine is popular, and there are many flavors to choose from, it has become the largest capsule coffee manufacturer in North America. This is also one of Keurig's strategies to grab market share.

Table 1: sales of major capsule coffee machine brands in North America from 2011 to 2016

Photo: Keurig capsule coffee maker is significantly ahead of NESPRESSO and other brands in annual sales (photo capture: Euromonitor.com)

3. Keurig sacrificed profits to sell coffee machines in order to make money from coffee capsules

In 1901, GILLETTE, an American razor company, created the disposable blade model, which sold razors at very low prices to attract consumers to buy, and then made a profit from high-profit disposable blade consumables. Keurig capsule coffee machines follow a similar route, attracting consumers at very low prices and even sacrificing profits to promote coffee machines at cost to places with high coffee consumption, such as restaurants, restaurants, and offices. Office workers, who are used to using Keurig at work, will also want to buy a Keurig coffee maker to use at home after work. When Keurig capsule coffee machines are bought in these places, Keurig will be able to make a continuous profit from customers' endless supply of consumer coffee capsules.

As a result, Keurig's performance has doubled, its share price has soared, and Americans are drinking more and more capsule coffee (up to 1% of total coffee consumption), attracting other coffee makers to want a piece of the pie. There are four options for these coffee makers to enter the market:

Plan 1: develop your own capsule coffee machine and capsule coffee and become a competitor to Keurig: as the volume of Keurig capsule coffee machine has reached 20 million, at US $100 each, if you want to replace the Keurig coffee machine, you must first prepare US $2 billion, which is too expensive and not feasible.

Option 2: work with channels other than Keurig to sell encapsulated coffee: for example, Starbucks already sells coffee beans through the channels of KRAFT, the largest food and beverage group in the United States, so they also produce coffee capsules for KRAFT's capsule coffee machines. However, due to the ineffectiveness (Keurig's capsule coffee market share is more than 90%), Starbucks later suspended the cooperation with KRAFT capsule coffee.

Plan 3: sell coffee capsules for Keurig coffee machines: the special capsules for Keurig coffee machines are K-Cup, which is protected by patent until 2012, and other coffee manufacturers cannot infringe on the production of K-Cup-like capsules. When the K-Cup patent expired in 2012, Keurig immediately adopted Digital Rights Management (DRM) (originally used in the publishing world to protect music or video copyright to avoid piracy) to identify the coating on the new K-Cup seal for the Keurig coffee machine to identify whether it is genuine K-Cup. Not the original or licensed Keurig CupMagne Keurig coffee machine will not start, blocking the intention to use other brand coffee capsules on the Keurig coffee machine.

Plan 4: join the Keurig platform in cooperation with Keurig: this seems to be the most effective way to successfully enter the capsule coffee market. Take Starbucks as an example, in addition to the income of customers coming to the store to consume coffee, the sale of instant coffee bags already accounts for 1% of its total turnover, and with the economic downturn, the proportion of this part is gradually increasing. In order to maintain its expansion, Starbucks urgently needs to catch the growth train of capsule coffee. The experience of failed cooperation with KRAFT makes Starbucks understand that only by joining the Keurig platform can we successfully enter the capsule coffee market.

(photo capture: Whosaidnothinginlifeisfree.com)

four. The addition of Starbucks makes the Keurig coffee platform more powerful.

For Keurig, although it has attracted some local coffee brands to join the platform, it has been hoping for a truly nationally representative boutique coffee, and Starbucks's wishes coincide with Keurig. Keurig let Starbucks have its own brand area on the platform, so that Starbucks is treated with courtesy. Starbucks sells Keurig coffee machines and K-Cup with the Starbucks logo in its coffee shop.

For Starbucks, this is tantamount to expanding the current instant coffee bag business, so that customers can enjoy Starbucks coffee at home, which does not conflict with the business of Starbucks coffee shop. Because the Starbucks coffee shop sells not only coffee, but also the "Starbucks experience", this part cannot be replaced by cheap Starbucks instant coffee bags or capsule coffee.

If you don't want to get paid, you must cultivate a "boss mentality". See how Howard Schultz changed from employee to boss, creating a Starbucks kingdom with 25000 stores)

The addition of Starbucks makes Keurig's coffee platform more convincing, and the progress of capsule coffee in cooperation with many coffee manufacturers is faster and smoother, and the taste and choice are more varied. For example, capsule coffee with Starbucks costs 75 cents each, which is much cheaper than a $5 cup of coffee in a Starbucks store. It is very attractive to consumers who want to drink Starbucks coffee at home.

Photo: 16 capsules of coffee with Starbucks cost about $12, equivalent to $0.75 each. (photo capture: Keurig.com)

In addition, because North America is the region with the largest growth in global sales of capsule coffee, and Keurig's capsule coffee is dominated by the North American market, it also brings huge benefits to Keurig Green Mountain.

Table 2: global sales of capsule coffee from 2011 to 2016

Photo: North America is the region with the largest global growth in capsule coffee sales (photo capture: (Euromonitor.com)

Keurig first draws customers with low-cost coffee machines, and then makes a profit from the capsule coffee that customers continue to consume. In fact, NESPRESSO can also copy, but why doesn't NESPRESSO follow? The main reasons are as follows:

Reason 1: although NESPRESSO is no match for Keurig in North America, it still has the highest market share of capped coffee in the world (NESPRESSO has a global market share of 35%). While NESPRESSO is high-end market positioning, if the price is reduced to compete with Keurig in order to compete for the North American market, it will not only disrupt the global layout, but also blur its leading brand position.

Reason 2: since NESPRESSO is the leading global brand of capsule coffee, it naturally has the pricing advantage of the product. Keurig is the follower of the market price and basically competes with NESPRESSO at a lower price, so Keurig gives full play to the survival philosophy of the second in the market, and there is no reason for NESPRESSO to follow the low-price strategy of Keurig.

Reason 3: NESPRESSO's practice of maintaining a high unit price can also maintain marketing flexibility, just as Starbucks has always maintained its high coffee pricing, but it often holds activities such as half price for the second cup of coffee, buy one get one free, or free coffee among its members. If NESPRESSO sets the unit price of its products high, it will have more room to hold all kinds of discount promotions without significantly affecting profits. If the pricing is reduced, there will be less flexible room for operation.

five. The crisis turned into a turning point, and Keurig introduced funds to open up the second pulse of the financial governor in the predicament, becoming the third largest beverage group in the United States.

However, the biggest risk of taking the platform model is the rapid expansion and stable cash flow. To seize the market share at a low price, you need enough capital to maintain it. If the sales volume does not meet the booking target, or if the subsequent growth cannot be sustained, once the market conditions turn around, it will be easy to make ends meet, resulting in huge losses.

In 2015, Keurig coffee machine sales of both Keurig coffee machine and capsule coffee shrank and profits were hit because of the wrong pricing strategy (launching a Keurig 2.0 coffee machine for nearly $200) and fierce competition in the capsule coffee market. As a result, Keurig was able to cut jobs and weather the crisis by accepting a $13.9 billion cash acquisition by European "JAB Holdings" in 2016. After Keurig was incorporated into JAB holding company, it was still able to operate independently.

Headquartered in Luxembourg, JAB Holdings invests mainly in boutique, coffee and health care. Its "COTY" owns Calvin Klein, Chloe, CLAIROL, MARC JACOBS and other boutique brands; its "JAB Coffee Holdings" and "ACORN Holdings" own BARESSO Coffee, BALZAC Coffee, JACOBS and other coffee brands; its "Reckitt Benckiser Group" owns Dettol (home cleaning), Nutramigen (anti-allergic infant formula), Clearasil (anti-acne and anti-acne lotion), and Durex and other health care brands.

Keurig's capital injection from JAB holding company is tantamount to obtaining strong financial support for its low-price market strategy, just as it has opened the last governor's second pulse, and from then on it can rest assured that it can sell the coffee machine at a low price and then slowly recover from the high-profit capsule coffee, without having to worry about the cash flow difficulties along the way. While JAB Holdings adds Keurig Coffee to its coffee system, it challenges Nestl é, the largest coffee kingdom in the world.

In January 2018, the cash-rich Keurig Green Mountain announced the acquisition of the American "Dr. Pepper Snapple" beverage group (which owns 7-up soda, Xiangji and other brands) for about $1.9 billion. After the merger, the new company will, under the name of "Keurig Dr. Pepper", combine the network access of Keurig and the physical access of Dr. Pepper to become a complete beverage company with coffee and soda, with annual revenue expected to reach US $11 billion, making it the third largest beverage group in the United States after Coca-Cola and Pepsi.

In fact, both the closed boutique route and the open strategic alliance have their own advantages and disadvantages. Keurig's strategy is obviously to walk the coffee capsule platform, and then through the platform to form gangs, the rapid rise, this is a successful example that we can refer to.