Coffee

Memorandum

Issues Keurig Inc, founder of single-cup brewing system that would allow coffee lovers to brew one perfect cup of coffee, has dominated the leading position in office coffee service (OCS) market. With commitment to a multiroaster strategy, the company has largest variety of coffees available with a single-cup system and is well branded to the consumers due to strong relationship on roasters’ coffee consumption experience. Building on its success in the OCS market, Keurig would launch its new model B100 system into the new market of at-home segment which is much larger but more competitive market. Before official launch in September 2003, Keurig has to figure out several issues of 1) potential confliction of channels at-home market brought to office market 2) Reevaluation of two-K-Cup strategy 3) other elements of the product plans, including price and marketing plan. Of course, there is critical factor of time which is only left for 6 month.

Background analysis At-home Single-Cup market characteristic The at-home market exhibits the structure of monopolistic competition with many potential competitors providing differentiated coffees. The positioning strategy for the market is product and customer focused. The life cycle is from embryonic to growth stage also because companies like Salton and Sara Lee are going to enter the market by the second half of 2003. The rivalry switches to increasing competitors from few ones. From overview of competitor’s launching plan and pricing plan targeted at $49-$70 for brewer and $0.20-$0.25 for pod listed in appendix 1, we could predict that their target customer segment is ground coffee drinkers with around 60% of 157 million at-home coffee drinkers in U.S. Their initial strategy is still keeping product differentiation

via using own single-cup system and be first entrants into the At-home market segment. The industry supply chain in appendix 2 demonstrates this market relies on the indirect channel via...