Green Mountain wants to reap the full benefits of the US single-cup coffee brewing phenomenon that it started. So the maker of Keurig brewing systems and K-Cup portion packs plans to leapfrog the increasingly problematic copycat crowd with a new "Keurig 2.0" system with "interactive readability" that won't work with copycat pods.
Competition in single-serve pods is getting fiercer, with new players such as Panera continuing to enter the hot marketplace. Yet Green Mountain has continued to dominate the industry. And at least Panera and other brands like Starbucks are coming into the segment under licensing arrangements with Green Mountain and makers of pod systems.
A far bigger problem for Green Mountain has been the fact that patents on its K-Cups ran out in 2012. Unlicensed copycats rushed in, and they've already grabbed 8 percent of the Keurig platform, CEO Brian Kelley told financial analysts this week, with a record penetration of 12 percent by end of Green Mountain's just-completed fiscal fourth quarter. Copycats' price points are as much as 25 percent lower than official K-Cups.
Kelley said that Green Mountain is "in discussions with a large number of unlicensed players to welcome them into the system." But a far more effective way to address the problem will be Keurig 2.0, which will include a way for brewers and licensed K-Cups to interact digitally—a system that won't work with copycats. He said that the new brewers and cups also would "fundamentally improve and transform the Keurig brewing system," so Green Mountain hopes to lure the 16 million consumers who bought the Keurig 1.0 system during the past two years to switch over.
"The job of innovation is to give the consumers something better than they have today and to do it at a value," Kelley said. "So we think that what we're going to give them with the Keurig 2.0 is not only what they have today but much more, and [we're] goint to do it at value pricing that they're used to today."
The major player in single-pod coffee in Europe, Nestle's Nespresso brand, also has been battling copycats, and arguably less successfully than Green Mountain in the United States. Nestle has invested heavily in the brand over the past few years, and sales hit more than $3 billion a year. Now even Nestle rivals such as Mondelez can't resist fielding thier own licensed pods for the Nespresso system.
But aggressive copycatting of its single-serve capsules by manufacturers of generics has slowed Nespresso sales growth. And Nestle just lost a decision by the European Patent Office on protecting its patent for ejecting the pods from the machine but somehow insisted that the ruling “does not have any impact on the current competitive situation.”
The world over, people are loving their cups of joe. And the fancier they have gotten, the more difficult it has been for the differentiating brands to protect what makes them special. Green Mountain is at least trying to strike a blow against that trend.