Private Label Buyer Blog

Keurig’s 2.0 Fail

August 27, 2014
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Keurig has announced that its next-generation coffeemaker (dubbed “2.0”) will not work with any coffee pods not made—or licensed—by Keurig. You also reportedly can’t swap out the cup to use your own grounds in the new machine. It only takes actual cups. In a word, 2.0 is restrictive.

In order to broaden appeal, the company recently struck a licensing deal with Kraft Foods to bring Maxwell House, Gevalia, Yuban and the McCafé products from McDonalds into compatibility. Several retailers have likewise struck licensing deals with Keurig in order to keep their private label lines compatible with the new brewer. These include Target, BJ’s Wholesale Club and Harris Teeter.

But if you don’t strike a deal with Keurig and pony up the fee, you’re out of the picture. So, at its core, this economically draconian decision is aimed squarely at regaining market share from private label en masse, with Keurig’s parent company Green Mountain still smarting from the dollar share lost to private label in the wake of its expired patent a couple of years ago.

This approach to business is known as “pay to play,” and it’s hardly reputable.

The technology employed in Keurig 2.0 is known as digital rights management (DRM), with “anti-counterfeiting” codes built into the single-cup lids. Expect trade-restraining, anti-competitive lawsuits to follow (look for the word “monopoly” to be bandied about…), with public and industry outcry that the 2.0 restricts consumer freedom. FTC will likely have comment—these legal challenges have merit—but it might take a while…

That said, more universally compatible, nonrestrictive, open-platform single-cup machines continue to come into the market, some of which have the ability to brew carafes—a key attractive feature of the Keurig 2.0. Many of these machines also provide a cost savings compared to Keurig. Hamilton Beach has its FlexBrew system, which can do single cups or carafes—and costs less than Keurig.

I’d also love to see a retailer with strong store brand housewares step into the fray with a private label single-cup/carafe, open platform coffee maker of its own. The timing is right, and the ability to offer the same versatility as the Keurig 2.0 in a lower-priced machine that will accept any type of K-cup as well as your own grounds (a more environmentally friendly approach espoused by many), would prove quite attractive—particularly when merchandised side-by-side, clearly pointing out the differences between the two machines.

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