Competitive Strategy Case Analysis Presented By: Kevin Dunsmore, Claire Fitzpatrick, Vicky Kao,

Rohin Mukhi, Kate Watt

Agenda

• Executive Summary

• Company Background

• Keurig KOLD

• Research: Survey Findings

• Alternatives

• Proposed Solution

• Recommendations

• What We Learned2

Executive Summary

• Keurig Green Mountain pulled Keurig® KOLD™, the at-home soda making machine, from store shelves after 9 months on the market.

• Vision for new product was to propel company’s growth beyond coffee

• Examine Keurig’s competitive marketing strategy for new product launch

• Define Keurig’s marketing objectives, target market, segmenting, positioning, pricing

• Assess reasons why Keurig KOLD failed to stimulate sales growth

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Company Background

• Keurig Green Mountain is a speciality coffee & coffeemaker company, headquartered in Waterbury, VT.

• Offers 400+ varieties of coffees, teas, hot chocolate and other beverages

• Offers 80+ Keurig brewing systems at leading retail stores across North America

• According to FY2015 Annual Report, over 50 million brewing machines sold globally, revenues over $4.5 million per year

• K-Cup patent expired in 2012, new entrants came to market with less expensive coffee pods

• Released Keurig 2.0, accepted specifically designed k-cups, rendering third-party pods and older model k-cups useless

• Moved toward cold beverages to diversify product mix, capitalize on untapped market4

Introducing: Keurig® KOLD™

Held exclusive partnerships with Coca-Cola & Dr. Pepper Snapple Group

Only at-home soda machine that brewed Coke products

Only at-home soda machine capable of producing ice-cold carbonated beverages in single pour

Perceived to be “noisy”, “clunky” and “expensive”

Suggested Retail Price: $369, Soda Pod 4-packs $4.50-$5.50

Source: CNET Review By Brian Bennett

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Product History

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Value Net

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Competitors

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4 FailuresPricing - SodaStream beat them to market and had already set the price of their machine low enough to where the $370 asking price was laughable. Plus...the K-pods

It’s about more than just Pop – Consumers want more than just pop. They want carbonated water, juices, and energy drinks. Kold only offered different varieties of pop, tea, and select fruit beverages. Plus….

A Market in Decline – As the Wall Street Journal reports, per capita soda consumption has been on a decline for years. Consumers are looking for healthier drinks, which Keurig did not provide at the launch of Kold.

Size Matters – Keurig Kold is not compact, nor is it easy to store anywhere. Keurig will need to find some way to make it compact. One way may be removing the refrigeration unit, which would also lower the cost to manufacture a hardware unit.

“Even if the Keurig Kold system was effortlessly convenient to use and its drink-making machine sleek and compact, the costs of owning and operating the device simply don't add up. Overlooking the comically high $370 price of the Kold device itself, paying $5 for packs of four pods is foolish.”

“Add to this a litany of frustrations such as a machine so large only Big Foot could love, tiny portions he certainly wouldn't, slow performance, plus flavor and fizz that don't match the bottled product, and it's hard to characterize this machine as anything other than a misfire. The Keurig Kold simply falls flat.”

-CNET Reviews 9

SodaStream: 1903 First model designed for home: 1955Used to entertain guests

Keurig Brewers: 1992Green Mountain: 1981Acquired Keurig: 2006Keurig Kold: 2014

Pioneer vs Follower

Source: http://www.sodasherpa.com/sodastream-history/ 10

Research Findings

There is a high demand for cold beverages with 54.55% of survey respondentsdrinking more than 7 cold beverages a week but not soft drinks (more than 80%drink 3 or less soft drinks on average)

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1,52%

21.2%

22.73%54.55%

10.61%

40.91%9.09%

39.39%

Research Findings

According to respondents, water and variations of water are still the most preferred type ofcold beverage. Alcoholic beverages follow at #2, Soft drinks at #3.

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1.52%13.64%

48.48%

36.36%

Research Findings

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Research Findings

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31.82%

68.18%

Key Takeaway:

If Keurig would like to attempt to enter the cold beverage market, they would need to focus on other cold beverages other than soda and find a way to make it cheaper for the consumers than buying the already made, prepackaged beverages from supermarkets.

Research Findings

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Alternatives• Focus on healthier beverage options

• About 60% of SodaStream users use the device only to make carbonated water, while only 7% use it exclusively for soda

• Coca-Cola was integral in the development of KOLD machine and pods. Wanted to invest in new technologies that emphasized healthier habits

• Marketing focused heavily on Coca-Cola products, specifically their flagship soda brand

• Utilize Coca-Cola’s healthier, low calorie beverage options: Fresca

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Alternatives• Remove refrigeration device

• Consider major differentiators between KOLD and competitors

• Survey results by Keurig showed interest in machine that offered cold beverages Was too big, loud, inconvenient, and unreliable 2 hour initial prep period Took 90 seconds to “brew” once prepped

• “If all you want is something cold you might find a mini-fridge a better investment”

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Proposed Solution

1. Offer (2) Keurig KOLD Brewers:○ Without cooling - entry level, stripped down, <=$150○ With cooling - high-end, bells & whistles, $369

2. Consider major benefits:○ Vertical differentiation - High, Low ○ Resolve issues/customer concerns - Pricing, Space, Noise, Time○ Wider acceptance, greater customer reach○ Competitive pricing vs Sodastream○ Showcase R&D (via higher-end model)○ More feedback avenues (via 2 products)

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Recommendations

• Segmentation for each product Identify clear targets

• Customer Needs analysis Specific features needed for each product

• Customer surveys Prioritize features/changes

• Pods Reduce price Third-party vendors

• Technology push vs. Pressure To Innovate strategy Market and Competitive analysis

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What We Learned 1. If given a chance to conduct the project again, we would spend more time cultivating a

diverse group of survey respondents. Ask open-ended questions to understand “Why” behind answers given. Gather data direct from source.

2. In an ideal world, insights on marketing strategy and target market prepared by Keurig and/or more statistically significant survey sample would help address problem. If Keurig put preventative measures and failure detection alerts in place, the company could have foreseen issues with KOLD launch.

3. We learned the importance of conducting extensive consumer research to uncover purchase motivations, retaining support from complementors to expand market opportunity and understanding competitive strategy from a business perspective.

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Questions?Thank You!

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