Keurig case

Group 10:

Le Hoang Kim Duyen-2959

Class 1 - Group 10 – Case 34

Le Hoang Kim Duyen – 295895

Tran Nhat Ha – 295921

Nguyen Hoang Hung – 295907

Industry Overview

Company History

Mission Statement and Vision

Products

Brands and the patented technology

Maps of where the company does business

Operational Structure

Financial Statement

SWOT Analysis

Where is the Keurig product in the life cycle?

How To Expand

Financial Conditions

Marketing Advertisement

E-commerce

Analyzing The Presence Market

The Competition -The Competitive Advantages

Internal Factor Matrix

External Factor Matrix

Competitive Profile Matrix

SPACE Matrix

GRAND Matrix

Quantitative Strategic Planning Matrix

The Problems-Market Development

The Timetable

The single cup coffee industry has grown in recent years:

• 2010 sales: 14 million dollars

• 2012 sales: 63 million dollars

45% growth

Conversely, bagged coffee has sagged

• 2010 sales: 274.8 million dollars

• 2012 sales: 297 million dollars

8% growth

Industry Overview

Company History

• Founded in the mid-90’s by Peter

Dragone and John Slyvane who believed

coffee should always be served fresh –

whether at home or at the office.

• Launched first commercial single-cup

brewer in 1998

• Keurig was acquired in 2006 by Green

Mountain Coffee Roasters, Inc.(GMCR)

and is a wholly-owned subsidiary of

GMCR

Mission and Vision

Mission Statement:

Brewing excellence one cup at a time®

Vision:

Keurig vision is to be the leading

specialty coffee company by providing

the highest quality coffee, having the

largest market share in the targeted

market while maximizing the company

value.

• K-Cup® System is an original single-cup brewing maker which is designed

to brew a single cup of coffee, tea, hot chocolate, or other hot beverage

• Keurig also obtains, produces, and sells various kinds of coffee, teas, cocoa

and other form of beverages in K-cup portion packs and coffee in

conventional packaging style

Keurig Vue System

Keurig improves its technology with the advent of Vue® System as a huge step

of innovation.

Keurig Rivo System

Owned Brands

®

Licensing/Manufacturing Agreements

Our Global Supply Chain Footprint

Sumner, Wa Montreal, Canada

Vermont *

Toronto, Canada Reading, MA

Castroville, CA

Knoxville, TNOur facilities

Canadian Business Unit

Keurig Business Unit

Specialty Coffee Business Unit

Enterprise Staff

Supply-chain partnerships

As our supply chain spans the globe, so does our supply-

chain outreach

CIAT /Catholic Relief Services

Central America, Guatemala

• Climate change adaptation

• Food security

Partners in Health

Mexico, Guatemala

• Health care - Food security

• Child and maternal health

• Environmental health

Grounds for Health

Mexico, Central America

• Women’s health

The Coffee Trust

Guatemala

• Food security - Education

• Income diversification

Coffee kids

Nicaragua, Guatemala, Mexico, Peru,

• Education - Income diversification

Heifer International

Mexico, Honduras, Peru

• Food security

Save The Children

Nicaragua, Honduras, Bolivia

• Children’s health - Food security

• Income diversification

Community Agro Ecology

Network

Nicaragua

• Food security - Youth training

Planting hope

Nicaragua

• Food Security

• Education

Café Femenino

Peru

• Access to clean water

Hawaii

Mexico

Colombia

Ecuador

Peru

Bolivia

Brazil

Guatemala

El Salvador

Honduras

Nicaragua

Costa Rica

Panama Uganda

Rwanda

Burundi

Vietnam

Period Ending 29-Sep-12 24-Sep-11Net Income $ 362,628   $ 199,501  

Operating Activities, Cash Flows Provided By or Used In

Depreciation 187,697   119,794  

Adjustments To Net Income 150,182   19,782  

Changes In Accounts Receivables (159,317) (157,329)

Changes In Liabilities 35,954   205,368  

Changes In Inventories (92,862) (375,709)

Changes In Other Operating Activities (7,369) (12,169)

Total Cash Flow From Operating Activities $ 477,785   $ 785  

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures (401,121) (283,444)

Investments 137,733   -  

Other Cash flows from Investing Activities (2,257) (904,228)

Total Cash Flows From Investing Activities (265,645) (1,187,672)

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid -   -  

Sale Purchase of Stock (64,378) 981,472  

Net Borrowings (124,099) 223,317  

Other Cash Flows from Financing Activities 3,283   -1,063

Total Cash Flows From Financing Activities (173,124) 1,199,845  

Effect Of Exchange Rate Changes 1,124   790  

Change In Cash and Cash Equivalents $ 45,300   $ 8,588  

Cash Flow

Short-term solvency, or liquidity, ratios 2011 2012

Current ratio 2.4 2.55

Quick ratio 0.98 1.07

Cash ratio 0.03 0.11

Long-term solvency, or financial leverage,

ratios2011 2012

Total debt ratio 0.4 0.37

Debt-equity ratio 0.3 0.2

Equity multiplier 1.67 1.6

Time interest earned ratio 1.54 0.27

Cash coverage ratio 1.54 6.17

Profitability ratio 2011 2012

Profit margin 0.076 0.094

Return on assets 0.062 0.1

Return on equity 0.11 0.16

Strengths:

The patented technology

Large varieties

Quality of product

Longer shelf life of product

Customer brand loyalty

Brand awareness

Opportunities:

Global market typically untapped

Increasing in the growth of industry

Quality considered important by

consumers

Increasing trend of specialty coffee

drinkers

Weaknesses:

Past failure strategic decision

Inappropriate strategic vision

Little brand presence

Few strategic alliances

Threats:

Decline in coffee consumption

High competition

Price volatility

Heavy reliance on specialty coffee

farms

Where is the Keurig product in the life cycle?

How To Expand

• Growing our Keurig® hot brewing system in North America.

• Launching new brewer technologies.

• Entering new beverage categories.

• Expanding in current channels.

• Offering new brands.

• Entering new geographies, with an initial focus on four countries

worldwide.

• Executing operationally by focusing on continued quality improvement and

lowering overall costs.

Financial Conditions

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Revenue Gross income Profit Total currentassets

2011

2012

Marketing Advertisement

• Keurig TV- How Does Keurig Always Have My Favorite- - Official

Commercial 2012

Enhanced search: allow consumers to

easily find their favorite K-Cup® portion

packs by refining their search by options.

New comparison tools: Use the drag and

drop brewer comparison wizard for a side-by-

side comparison of brewer features and

specifications to find the perfect fit.

Store locator: Positioned within the site to

make it as easy as possible to purchase

Keurig products online or at thousands of

retail locations in both the U.S. and Canada.

Consumer engagement tools: product ratings

and review, and a social media share bar integrated

into the website to streamline sharing consumer

product passion on Facebook, Twitter and other

social media channels.

Fun and interactive experience: Visit the

Explore area to review and print delicious recipes,

view product demos, indulge in love letters from fans

and learn about seasonal offerings.

Improved loyalty program: Keurig's Coffee

Club program awards 1 point for every K-Cup

purchased on Keurig.com, starting with the first

order.

Analyzing The Presence Market

The Competition

• Competition in the single-cup brewing

system market was increasing as relatively

low barriers to entry encouraged new

competitors to enter the market, particularly

with typically lower-cost brewers that brewed

coffee packaged in non-patented pods.

• Many currents and potential competitors had

substantially greater financial, marketing, and

operating resources than Keurig such as

Nestlé (Nespresso and Dolce Gusto), Kracft

(Tassimo), and Mars (Flavia).

Nestle

• Nestle, which has a 35% global share

of the single-serve market, has only a

tiny presence in North America

• Wants a bigger share of the market in

the U.S.

• North America is the second-largest

market in the $8 billion single-serve

market

• Nestle dominates the European

market with a commanding 70% share

The Competitive Advantages

• Keurig has a strong brand in the field of the single-serve brewing coffee. It

is introduced in 1997.

• The partnership is one of the largest strengths of Keurig compared to other

competitors.

• Keurig is available in many different distribution channels.

• Strength of Keurig is related to the patented technology.

• The large majority of customers said that they feel enjoy with Keurig

products and services

The Competitive Advantages

Keurig is a advanced, personal beverage system:

• A premium experience brought into the home.

• A network system effect.

• A brand accelerator.

• An in-home beverage creation system.

• An enabler to understand the demand signal in home

Internal Factor Evaluation Matrix

Key internal factor Weight Rating Weighted score

Internal Strength

The patented technology 0.05 4 0.2

Large varieties 0.1 3 0.3

Quality of product 0.1 4 0.4

Longer shelf life of product 0.1 4 0.4

Customer brand loyalty 0.05 4 0.2

Brand awareness 0.1 4 0.4

Internal Weakness

Past failure strategic decision 0.2 2 0.4

Inappropriate strategic vision 0.1 1 0.1

Little brand presence 0.1 1 0.1

Few strategic alliances 0.1 1 0.1

Total 1.0 2.6

Key external factor Weight RatingWeighted

score

Opportunities

Global market typically untapped 0.15 2 0.3

Increasing in the growth of industry 0.15 2 0.3

Quality considered important by consumers 0.10 3 0.3

Increasing trend of specialty coffee drinkers 0.15 3 0.45

Threats

Decline in coffee consumption 0.1 1 0.1

Decline in coffee consumption 0.1 2 0.2

Price volatility 0.05 2 0.1

Heavy reliance on specialty coffee farms 0.2 2 0.4

Total 1.0 2.15

Competitive profile matrix

Keurig Procter gamble Nestle

Critical success factors Weight Rating Score Rating Score Rating Score

Advertising 0.1 1 0.1 3 0.3 3 0.3

Product quality 0.2 2 0.4 1 0.2 1 0.2

Price competition 0.05 2 0.1 2 0.1 1 0.1

Management 0.1 3 0.3 3 0.3 4 0.4

Financial position 0.1 3 0.3 4 0.4 4 0.4

Customer loyalty 0.15 2 0.3 1 0.15 1 0.15

Global expansion 0.15 4 0.6 4 0.6 4 0.6

Market share 0.15 3 0.45 4 0.6 4 0.6

Total 1 2.55 2.65 2.75

Internal Strategic Position External Strategic Position

Financial Strength

• Return of investment: 6

• Financial and operating leverage: 5

• Liquidity: 6

• Working capital: 4

• Cash flows: 5

Average: 5.2

Industry Strength

• Growth potential: 5

• Profit potential: 6

• Financial stability: 6

• Resource availability: 4

• Ease of entry: 5

• Capacity utilization: 3

Average: 4.8

Competitive Advantage

• Market share: -5

• Quality: -2

• Product life cycle: -2

• Customer preference: -2

• Technological innovation: -1

• Sound supply chain: -2

Average: 2.3

Environmental Stability

• Technological changes: -5

• Inflation: -5

• Demand elasticity: -5

• Competitor’s price ranges: -1

• Barriers to entry: -3

• Competitive pressure: -6

• Ease of exit: -5

• Price elasticity of demand: -5

• Risk exposure: -3

Average: 4.2

Quantitative Strategy Planning Matrix

Key internal factor Weight

Market Development

The innovative

strategy

The multi-

channel strategy

The creative

strategy

AS TAS AS TAS AS TAS

Internal Strength

The patterned technology 0.05 4 0.2 3 0.15 4 0.2

Large varieties 0.1 1 0.1 2 0.2 1 0.1

Quality of product 0.1 4 0.4 4 0.4 4 0.4

Longer shelf life of product 0.1 3 0.3 4 0.4 3 0.3

Customer brand loyalty 0.05 4 0.2 4 0.2 3 0.15

Brand awareness 0.1 3 0.3 3 0.3 4 0.4

Internal Weakness

Past failure strategic decision 0.2 1 0.2 1 0.2 1 0.2

Inappropriate strategic vision 0.1 2 0.2 2 0.2 2 0.2

Little brand presence 0.1 1 0.1 1 0.1 1 0.1

Few strategic alliances 0.1 2 0.2 3 0.3 1 0.1

Total 1.0

Key external factor

Opportunities

Global market typically untapped 0.15 2 0.3 1 0.15 1 0.15

Increasing in the growth of industry 0.15 3 0.45 2 0.3 2 0.3

Quality considered importantly by consumers 0.10 4 0.4 4 0.4 4 0.4

Increasing trend of specialty coffee drinkers 0.15 3 0.45 3 0.45 3 0.45

Threats

Decline in coffee consumption 0.1 4 0.4 3 0.3 4 0.4

High competition 0.1 3 0.3 3 0.3 3 0.3

Price volatility 0.05 3 0.15 4 0.2 2 0.1

Heavy reliance on specialty coffee farms 0.2 1 0.2 2 0.4 1 0.2

Total 1.0

Total sum of attractiveness score 4.85 4.95 4.45

Quantitative Strategy Planning Matrix

The Problems

The product price

The financial debt

Market Development

Innovative Strategy

Multi-channel Strategy

Creative Strategy

The Timetable

The Timetable