NEW YORK, Sept 30 — Keurig Green Mountain, the struggling coffee and coffee maker company, is hoping a pricey new machine for concocting cold drinks will help improve its fortunes.
The company is beginning to sell Keurig Kold — essentially, a home soda fountain — in six cities and online. Priced at US$299 (RM1,329) to US$369, depending on promotions offered by retailers, the new machine is by far the most expensive in Keurig’s lineup.
Brian Kelley, chief executive of Keurig, said at a demonstration of Kold on Monday that the machine deployed far more sophisticated technology, drawing on parts and processes found in the aerospace and weapons businesses.
“We’re literally bringing a bottling plant into the home with this machine,” Kelley said.
Flash-heating water takes seconds, but figuring out how to bring room-temperature water to 33 degrees Fahrenheit — the temperature needed to ensure proper carbonation — was a much bigger challenge, he said.
While eagerly anticipating the introduction of a machine that would make cold drinks in the same way Keurig’s home brewing system makes hot beverages, investment analysts also have fretted over the amount of money the company has spent on Kold.
All told, Keurig will spend upward of US$200 million on Kold this year and next, not including the capital expenses associated with building the machine, and questions abound about how quickly and widely it will be adopted by consumers. SodaStream, which uses a far more conventional system to make cold drinks, experienced a 45 per cent plunge in sales of its flavour bottles on top of a 37 per cent drop in device sales in its second quarter, compared with the same period last year.
Keurig also is struggling with sales of its coffee machines, after a botched rollout of its second-generation system last fall. Consumers balked at Keurig 2.0’s higher price and were confused about whether it used the same K-cups as the older system. (It does.)
Then, just before Christmas, Keurig recalled some 6.6 million Mini Plus Brewing System machines in the United States and 546,000 in Canada after the Consumer Product Safety Commission found that they sprayed hot water when overheated.
At the same time, the profit margin on some of the company’s K-cups has not been as strong as in the past — and retailers have reported higher numbers of returns of the new model coffee system. “We are not satisfied with our financial results for the third quarter,” Kelley told investment analysts in August.
Such problems caused the company to miss some of its financial targets this year. Keurig’s stock price is down more than 50 percent over the past 12 months, and in August Kelley announced an overhaul that included laying off 5 percent of the company’s more than 6,000 employees and replacing some senior executives.
Kold produces a cold drink in just over one minute after its reservoir is filled and a flavour cartridge is inserted. It can make Coca-Cola, Sprite, Coke Zero and other Coca-Cola flavours, as well as Dr Pepper, and Keurig has come up with its own brands, like Seraphine flavoured waters and Red Barn colas, which are made with cane sugar rather than high-fructose corn syrup.
Tara Murphy, senior vice president for Keurig Kold systems, said consumer research six years ago among buyers of Keurig systems indicated strong interest in a cold machine. About 20 million households in America have Keurig coffee machines.
She said Keurig was aiming Kold at bars and den areas and keeping it away from kitchen counters already occupied by Keurig coffee makers. “It’s for people who entertain a lot and want to have the latest technology to show off,” Murphy said.
Duane Stanford, editor of Beverage Digest, said that was a good strategy for the new machine, which cannot compete with canned and bottled soft drinks on price. Keurig will sell packages of four flavour cartridges for Kold at suggested retail prices ranging from US$4.49 to US$4.99, making the cost of each drink about US$1.12 to US$1.25.
“It would be a mistake to evaluate Keurig Kold as an everyday replacement for mainstream soft drinks in bottles and cans,” Stanford said. “This is a premium product that taps into some consumers’ love of technology and personalisation.” — The New York Times
