One cup at a time – the rise of Keurig

Keurig Green Mountain Inc.

Keurig was founded in 1992 by John Sylvan and Peter Dragone, both graduates of Colby College in Maine. Their goal was a simple machine to brew fresh cups of coffee, one at a time. In 1993, the company landed an important early investor – Vermont-based Green Mountain Coffee Roasters.

Building a reliable single-serving coffeemaker proved remarkably difficult. It wasn’t until 1998 that the Waltham company developed a reliable single-serving coffee maker for use in businesses – a $900 unit that had to be connected to a building’s water system by a plumber.

In 2002, Keurig began developing a plug-and-play version of the single serving machine for home use. The new coffeemaker went on sale in 2004, and despite competition from giant rivals like Procter & Gamble and Sara Lee, the Keurig machine soon dominated the market. In 2006, Keurig was acquired by Green Mountain in a deal valued at $160 million.


The company continued to surge. By 2008, single-serving pods of Green Mountain coffee, known as “K-Cups,” were available at supermarkets throughout the US. And the company signed licensing deals with major coffee vendors, including Dunkin’ Donuts and Starbucks, to make their blends available in the K-Cup format. Keurig made substantially more money on coffee sales than on its coffeemakers. In fiscal year 2014, for instance, the company generated $822.3 million in revenue from coffee machines, but $3.6 billion from sales of coffee pods. In the same year, the company renamed itself Keurig Green Mountain.

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But Keurig faced a serious threat. The patents on the company’s technology expired in 2012. Now any company could put their own coffee into copycat K-Cups, without paying a dime in royalties. To fight back, Keurig began developing a new version of its coffeemaker, which would work only with company-approved coffee pods. Consumers rebelled against the new machines, which went on sale in September of 2014, and sales of Keurig coffeemakers fell 24 percent to $632.5 million in fiscal 2015.

The company’s recent troubles have slammed its stock price. Shares of Keurig Green Mountain traded as high as $157 in mid-November of 2014, but fell as low as $38.90 one year later. As of Monday morning, the company’s shares were priced at $89.57, up 73 percent from Friday’s close on the Nasdaq Stock Market.

In a bid to boost its growth, Keurig Green Mountain has launched a number of new products this year, including an extra-large K-Cup for brewing large cups of coffee; a line of instant single-serving soups from the Campbell Soup Co., and Keurig Kold, a machine that makes flavored soft drinks, including beverages from the Coca-Cola Co., which owns 16 percent of Keurig Green Mountain. But the introduction of the cold-drink machine has been slower than anticipated, and consumers have been underwhelmed by the product, also driving down the share price.

Hiawatha Bray can be reached at Follow him on Twitter @GlobeTechLab.