Investors skeptical as Keurig Kold details released

Keurig Kold will use small packages of ingredients similar to coffee pods to pump out carbonated soda, cocktail mixers, sports drinks, and other cold beverages.Keurig Green Mountain

Keurig Green Mountain Inc. unveiled new details of its forthcoming cold beverage system Thursday, saying the machines will cost around $300 or more and will be rolled out slowly over the next year and a half.

Keurig is best known for its popular hot coffee- and tea-makers, but in 2014 struck a $1.25 billion deal with Coca-Cola Co. to develop a home-brew system for sodas and other cold beverages. Dubbed Keurig Kold, the system will use small packages of ingredients similar to its coffee pods to pump out carbonated soda, cocktail mixers, sports drinks, and other cold beverages.

The Keurig Kold counter-top machine will sell for between $299 and $369, depending on the retailer, the company said — significantly more than the hot system. The pods will retail for $.99 to $1.29 each. Among the initial offerings will be drinks from Coke, Dr. Pepper, Snapple, plus a suite of new flavored teas, cocktail mixers, sports drinks, and zero-calorie flavored waters made by Keurig.

“Our Kold technology allows us to play in a number of large and important beverage categories,” Keurig Green Mountain chief executive Brian Kelley told investors at a presentation, adding that the product “will broaden the reach of Keurig from a morning to an all-day, all-night appliance.”

The machine has its own chilling mechanism and can make six to eight drinks in a row before it needs to recharge. Adding already chilled water will allow users to make around 30 drinks in a row.

The Kold technology includes “carbonation beads” in the pods that eliminate the need for bulky carbon dioxide canisters and took five years to develop, the company told investors at a presentation Thursday.

The company said it would roll out the Kold product in a “deliberate manner,” making it first available online this fall, then gradually releasing it to stores until a full national rollout by the 2016 holiday season.

The slow roll-out and relatively high price point prompted skepticism from several investors who attended the presentation, and the company’s stock was down more than 5 percent in after-hours trading after the announcement. Prior to the Keurig Kold presentation, the stock had closed at $103.08 in regular trading.

Keurig’s stock has already taken a beating this year after the disappointing debut of its Keurig 2.0 coffee system, which was engineered to prevent customers from using coffee from unauthorized makers. The company has since admitted that was a mistake and released a refillable cup that is compatible with the 2.0 system and allows customers to brew their own coffee.

Kelley acknowledged that even at $299 and up, the company was subsidizing the cost of developing and manufacturing the Kold machines, hoping to make money on the sale of pods over time. He cautioned that 2016 would be a “significant” investment year for the company.

But Kelley said the price of Keurig Kold would eventually decrease as consumer adoption grows. He also defended the gradual release as a disciplined approach that would allow demand to build as consumers and retailers learn about the product. And he argued that unlike the hot system, which competes against ubiquitous drip brewers, few other companies are selling cold make-your-own-drink systems.

“We’re confident in the pricing we’re going out at,” Kelley said. “Consumers see this very differently than a coffee machine. It’s a new piece of technology.”

Eventually, Keurig Green Mountain thinks the Kold system will be more popular than its suite of hot machines.

Coke’s global distribution, iconic brand, and marketing prowess will be key to driving consumer adoption of the Kold system, executives said. The soda giant has since increased its ownership of Keurig Green Mountain and now holds 16 percent of the company’s stock.

Keurig’s main competitor in the home cold beverage business is SodaStream International Ltd.. Priced from $79.99 to $199.99, SodaStream machines require the use of carbon dioxide canisters and do not chill the beverage.