Keurig Case Study
Meaning excellence in Dutch, Keurig, was founded in 1990 by Peter Dragone and John Sylvan. The founders were on a highly caffeinated mission to completely alter the coffee industry with the underlying belief that coffee should be served fresh by the cup. They wanted to bring the gourmet coffeehouse experience to both the home and the office. Dragone and Sylvan wished to not only make this possible, but to do so in a satisfying, convenient and efficient way.
In 1998, Keurig released their first single-serve brewing coffee machine. The machine could also serve a cup of hot tea or hot cocoa. In 2006, Keurig merged with Green Mountain Coffee Roasters ...view middle of the document...
This means that Keurig is most likely not using its short-term assets as efficiently as they should be. The company would be in better shape if the current ratio were closer to 1, meaning that it would be able to repay its short-term debt.
III. SWOT and Five Forces Analysis
Strengths | Weaknesses |
* Strong brand in single-serve coffee brewing field * Solid brand partners * Innovative and patented technology * Many different distribution channels * Quality brew * Convenience/Speed/Eco-friendly * Variety of products/options | * Cost of machine for consumers * Lack of advertising * Dependence on bean and machine manufacturers of GMCR * Small coffee brand portfolio |
Opportunities | Threats |
* Possible expansion in Asia, South America, Europe, Canada * Expansion of brand offerings, both owned and partnered brands * Continued innovation in both hot and cold brewing systems * GMCR’s launch of Vue brewing machine (strength, temp change) | * Companies making their own single brewing machines and ‘k-cups’ * Health and safety concerns of chemicals in brewing machines * Heavy reliance on specialty coffee * Intense specialty coffee competition * Decrease in demand for coffee, overall |
The major areas of concern and/or focus presented by this SWOT analysis include companies making their own single-brewing machines or K-cups. There is also a heavy reliance on specialty coffee, which raises concern, also considering the intense competition amongst specialty coffee. The key points that were revealed from the SWOT analysis are that Keurig should focus the majority of its energy on innovation and expansion.
Porter’s Five Forces
a) Threat of New Entrants
As competition in the single-cup brewing market continues to increase, the barrier to entry remains relatively low. This encourages competitors to enter the market. The competitors are aware that creating a lower-cost brewing machine that can brew coffee in the pod style (non-patented) would give them a competitive advantage over Keurig, whose products are considered quite expensive. Three main competitors include Nestle, Starbucks, Kraft and Mars. All three companies have greater financial, marketing and operating resources.
b) Bargaining Power of Suppliers
Keurig has a low concentration of suppliers, which therefore limits the bargaining power of these suppliers.
c) Bargaining Power of Buyers
Buyers ultimately have more bargaining power than the suppliers. This is because Keurig will be more interested in keeping consumers happy so that they can maintain relationships and brand loyalty. For example, consumers can demand new flavors of coffee that fit their personal preference.
d) Threats of Substitute
The threat of substitutes is relatively low solely because of the fact that there is a limited number of substitutes. Keurig is the top Single-brewer coffee machine.
e) Intensity of Rivalry