Small cup creates a big market Green Mountain Coffee shares have risen 36 times in five years.

If you are a coffee lover, Blue Mountain Coffee must be no stranger to you, but do you know Green Mountain Coffee? This is a company that makes inroads into the North American market with a single-cup coffee system. As of September 2013, Green Mountain Coffee's Krieger coffee machine and matching K-cup coffee had reached 13% of American households.

According to the data, Green Mountain Coffee achieved an operating income of US $4.358 billion and a net profit of US $484 million in fiscal 2013, of which 92% of the revenue was contributed by the Krieger coffee machine and its matching K-cup drinks, while the revenue of K-cup alone reached US $3.187 billion.

Relying on the continuous consumption of K-cups to make a profit, Green Mountain Coffee has gradually grown from a small company with a market capitalization of less than $300 million to a large enterprise with a market capitalization of $19.521 billion (about 120.675 billion yuan).

The "razor holder + blade" mode helps the performance blowout /

At first, Green Mountain Coffee was an unknown coffee roasting company. In 1981, families became rich in the American summer resort of Vermont, making money by selling coffee to tourists. Green Mountain's profits are very limited in the mature and saturated traditional coffee market.

Innovation from Krieger became an opportunity to reverse the fate of Green Mountain, and the company's founder accurately seized on a consumer pain point: "Why do we have to make a pot of coffee at a time?" I only have one drink at a time. " Driven by this idea, the Krieger coffee machine which makes only one cup of coffee at a time and its matching single-cup drink K-cup arises at the historic moment.

The so-called K cup is a container that looks like a paper cup, which has a smaller paper cup-shaped infiltration device, which can only penetrate liquid. The cup is filled with coffee, tea or other drinks and sealed with aluminum foil to ensure that the aroma of coffee and other drinks will not be emitted. Consumers only need to put the K cup into the coffee machine, and a cup of strong coffee will be ready a minute later. The emergence of this way of drinking coffee has changed the traditional experience of consumers.

K cup simplifies the traditional coffee machine grinding coffee beans, weighing and other tedious steps, one cup at a time, now drink, compared with traditional coffee, there is little difference in taste. To prevent other companies from entering the market, Krieger's single-cup coffee maker can only be used with the company's patented K-cup.

At the beginning of K-cup coffee, only a few small coffee brands joined, and Krieger collected royalties from it, and Green Mountain Coffee was one of the partners at that time. In June 2006, Green Mountain Coffee acquired all shares of Krieger for 2/3 of the previous year's revenue for a total of $104.3 million, acquiring its single-cup coffee maker and K-cup business. The deal became the most important turning point for Green Mountain Coffee. After the acquisition, Green Mountain's business was divided into two parts: green Mountain Coffee and Krieger Coffee Machine and its K-cup drinks. At this point, Green Mountain Coffee has also completed the transformation of its business model.

The Krieger coffee machine is sold at cost, and several boxes of K cups of coffee are given away when selling the coffee machine. Taking into account the advertising expenses, the coffee machine can be said to be a loss-making business, but once consumers buy the Krieger coffee machine, they will continue to buy K cups. Green Mountain's profit comes from consuming K cups. This is a typical "razor holder + blade" mode, when you buy a razor holder, you need to keep buying blades to ensure that the razor can be used properly.

Green Mountain Coffee sells coffee machines at cost, and then makes money by selling K-cup drinks one after another. The transformation of the business model has brought huge benefits to Green Mountain Coffee. Before the acquisition of Krieger, the revenue of Green Mountain Coffee grew at a compound annual growth rate of 23.5%. After the acquisition, the revenue compound growth rate jumped to 52.7%.

Rely on Internet thinking to catch up.

In fact, long before the appearance of Green Mountain K Cup, there were similar products in the European market. Because of their small size, they are collectively called capsule coffee. According to a reporter from the Daily Economic News, Nestle and Bosch all have their own capsule coffee machines.

Take Nesso as an example, this coffee machine can only use Nespresso coffee capsules. Under this closed system, Nestl é has the absolute pricing power of the product, and the price of a cup of Nespresso coffee is usually three times that of filter paper coffee.

However, in the traditional capsule coffee machine market, the rising star Green Mountain has broken out with its unique Internet thinking, and has become the mainstream of the coffee machine market. The specific approach is as follows: K-cup coffee is not only for Green Mountain's own coffee brand, other coffee manufacturers can also use K-cup patent packaging on Green Mountain's single-cup coffee machine as long as they are willing to pay 6 cents / cup royalty to Green Mountain. The inclusiveness of this platform has not only attracted an influx of coffee brands, but tea and hot cocoa producers are also happy to participate.

Relying on this open K-cup ecosystem, Green Mountain has not only been able to enrich its product range, expand rapidly, and even become the setter of industry standards.

The reporter read the Green Mountain fiscal year 2013 report and learned that at present, K Cup already has 35 brands, more than 200 kinds of coffee, tea and hot cocoa, which can meet the different needs of consumers. More and more beverage manufacturers are joining in, hoping to get a piece of the K-cup market.

Market capitalization increased from US $300 million to 20 billion /

As an American company, its inherent advantages make Green Mountain more familiar with the consumption habits of the North American market. At present, the main market of Green Mountain Coffee is also concentrated in the United States and Canada.

In fiscal year 2009, Krieger coffee machines became the mainstream consumption in the North American market. In that year, Green Mountain Coffee's revenue, gross profit and net profit increased by 61%, 41% and 151% respectively compared with the same period last year. K-cup coffee material cup shipments exceeded 1.6 billion, an increase of 63% over the same period last year.

In terms of channel expansion, Green Mountain has established a cooperative relationship with Wal-Mart, increased the promotion of Krieger coffee machines and green mountain coffee products, K-cup categories are also more abundant, lattes, hot cocoa and iced tea have been introduced one after another, further expanding the choice of consumers.

According to Green Mountain Coffee's 2009 annual report, its Krieger single-cup coffee maker was already among the top three best-selling coffee machines in the United States, and K-cup drinks were sold in 8500 supermarkets, up from 2600 a year ago.

A reporter from the Daily Business News noted that with the continued expansion of channel sales, Green Mountain shares rose from about $8 to $26.67 in the fiscal year, up more than 200% in 12 months. leaving the S & P packaged food and meat sub-industry index far behind.

At the same time, as more and more offices, hotels and families in North America buy Krieger coffee machines, Green Mountain's market share has further expanded. By the fourth quarter of fiscal 2010, Krieger single-cup coffee machines had become the leader in the coffee machine market, accounting for 26.5% of the top four best-selling coffee machines. More and more coffee brands have joined the K-Cup stronghold, and Duncan Donut coffee joined K-Cup in 2011. Soon after, Starbucks Coffee and its Taishu Tea were also involved in this ecosystem, further strengthening the market position of the Krieger coffee machine and its K-cup.

In the seven years since the acquisition of the Krieger brand, Green Mountain's revenue has increased 19 times, its profit has increased 57 times, and the company's share price has climbed all the way up from about $3 in 2006. In September 2011, it once reached $111, a cumulative increase of 36 times in five years, with a market capitalization of $19.521 billion, or 120.675 billion yuan, based on the company's latest share price of $119.95.

In this way, with the "razor holder + blade" model and the platform K-cup ecosystem, Green Mountain Coffee has grown from a small company with a market capitalization of less than $300m to a large company with a market capitalization of about $20 billion.