To: Dr. Gordon
Date: September 9 2012
Re: Keurig Case Analysis
Strategic Question: Which product and pricing strategies should Keurig follow to move into the home market.
Facts about the case:
Keurig Inc. was founded to develop an innovative technique that would allow coffee lovers to brew one perfect cup of coffee at a time. It developed and patented single portion pack and a revolutionary new coffee brewer. Its first brewers were initially targeted towards the office coffee service market. In February of 2002, however, its ownership structure changed enabling it to raise $10 million in capital to expand into the at-home coffee service business.
A year later, it developed a new model known as the B100 system and planned to launch the product in the at-home market. Before its launch however, 42% owner, GMCR made a proposition to alter the at-home portion of the coffee pack known as a K-cup and gave several compelling reasons.
Keurig’s original commercial design of the K-cup brewer featured a system that worked in the following manner. The machine itself is hooked up to a water line, with automatically refillable water reservoir that maintained up to 12 cups of water at brewing temperature. When a customer inserts a K-cup in the brewer’s drawer, positioned an 8-ounce cup to receive the coffee and pressed the “brew” button, the brewer would pierce the K-Cup, inject pressurized hot water and brew the coffee.
* How should Keurig respond to GMCR’s request to switch to the single K-cup approach? What information do they need to make that decision?
* How will their other roasters and the KAD’s respond? Can their team really implement a new game plan and still launch in six months?
* Can they afford the write off on the new Keurig cup and packaging the tooling?
* What is the right price for the brewer? Is there a way to afford the $149 price point on the brewer that they didn’t think of?
* How should the...