Keurig knows that time is of the essence. The company makes a hot beverage system that brews a single cup of coffee or tea in less than a minute. The system uses portioned-product "K-Cups" designed for use with its machines. Some 200,000 of its systems are located in offices, foodservice outlets, and homes in North America. The system was developed in 1998, when the firm licensed Green Mountain Coffee Roasters (GMCR) to pack its specialty coffees in Keurig's patented K-Cup. (GMCR acquired Keurig in 2006 for about $104 million.) Other partnerships include coffee roasters Gloria Jean's, Timothy's World Coffee, specialty tea makers Bigelow and Celestial Seasonings, and GMCR-owned Diedrich and Van Houtte.
Prior to GMCR's purchase of Keurig, it owned 35% of its shares. The deal made Keurig a wholly-owned subsidiary of GMCR and allowed Keurig to retain its headquarters in Massachusetts. For the pair, the agreement has offered growth potential in the office and at-home markets. It has also allowed the company to extend its reach into grocery stores. Keurig rolled out its single-cup brewing system (the Classic) -- to pair with GMCR's K-Cup portion packs -- to grocery stores nationwide. The acquisition seems to have paid off. During its first year together, Keurig's portion of its parent's sales rose more than 88%.
To springboard from these successes, Keurig's parent in 2010 acquired Van Houtte, Keurig's licensing partner in Canada since 2001. The deal gave Keurig and its owner a foothold in Canada's coffee services business and retail stores. The move also places Keurig and its K-Cups head to head with some lofty rivals.
Keurig spent 2010 inking deals to boost revenue and to further extend its reach. The coffee provider partnered with Twinings to offer tea in Keurig's patented cups and The J.M. Smucker Company to provide Twinings, Folgers Gourmet Selections, and Millstone brands names in K-Cup portion packs.
Competition has heated up in the single-cup coffee niche during the past few years. Rival Procter & Gamble joined the playing field and Keurig battled a patent lawsuit with Kraft Foods, Kraft Foods Global, and Tassimo Corporation -- all Kraft entities. The settlement was announced in November 2008 and it details that Keurig will receive some $17 million for Kraft being granted a limited, non-exclusive license for certain Keurig US and global patents. The company's K-Cup line was not part of the litigation.
Keurig is led by president Michelle Stacy, who joined the company in late 2008 from rival P&G after having logged more than 20 years in marketing and global business management. Stacy is known for her integration expertise and brand-building. The executive's resume includes such noteworthy brand names as Gillette, Oral-B, Waterman, Parker Brothers, and Clairol. – less