5-Force Analysis of Keurig Brewing System by Jay Haque
Abstract
Green Mountain Coffee Roaster’s Keurig Single Brew system is dominating the U.S. market with an overwhelming market share. Analysts expect sales of single-cup brewing systems to continue to grow in the U.S. and competitors are eyeing a piece of the pie. An analysis of Keurig’s current position, based on Michael E. Porters 5-Forces, highlights a number of key areas of opportunity and risk for the company. Handled correctly, the Keurig product line should continue its growth, however, a number of significant pitfalls threaten its dominance. Keywords: Green Mountain Coffee Roasters, Keurig
5-Force Analysis of the Keurig Single Brew Coffee System
Rivalry Consumers considering single-cup brew coffee units are looking for convenience, ease of use, and a variety of coffee selections. For GMCR’s Keurig line of brewers, competitive rivalry exists with other single-cup brew coffee manufactures, specifically Tassimo (Kraft), Nespresso (Nestle), Senseo (Sara Lee), Flavia (Mars), and a few other niche players. Nespresso has been a tremendous success for Nestle in Europe, with organic growth of 20% in 2010 on sales on 3.53 billon (Nestle Annual Report, 2010). Pricing for coffee pods is similar on a per unit basis ranging from $0.36 to $0.87 depending on brand preference (Repanich, 2010). The brewers vary in pricing, but range from just around $100 to well over $500. At the moment, GMCR is benefiting from significant brand recognition of the Keurig product line in the United States. Keurig has over 70% of the market share, dwarfing the competitors, so much so that Starbucks dumped Tassimo, which had a mere 2%, in favor of Keurig (Helm, Jan 2011) earlier this year. Starting next year, Keurig brewers will appear in Starbucks stores, further strengthening the brand (Chase, March 2011). Starbucks research showed that more 80% of their current customers did not yet own a single-brewer system (Starbucks, March 2011), hinting at an avenue of growth. It is
Green Mountain Coffee Roaster’s Keurig Single Brew system is dominating the U.S. market with an overwhelming market share. Analysts expect sales of single-cup brewing systems to continue to grow in the U.S. and competitors are eyeing a piece of the pie. An analysis of Keurig’s current position, based on Michael E. Porters 5-Forces, highlights a number of key areas of opportunity and risk for the company. Handled correctly, the Keurig product line should continue its growth, however, a number of significant pitfalls threaten its dominance. Keywords: Green Mountain Coffee Roasters, Keurig
5-Force Analysis of the Keurig Single Brew Coffee System
Rivalry Consumers considering single-cup brew coffee units are looking for convenience, ease of use, and a variety of coffee selections. For GMCR’s Keurig line of brewers, competitive rivalry exists with other single-cup brew coffee manufactures, specifically Tassimo (Kraft), Nespresso (Nestle), Senseo (Sara Lee), Flavia (Mars), and a few other niche players. Nespresso has been a tremendous success for Nestle in Europe, with organic growth of 20% in 2010 on sales on 3.53 billon (Nestle Annual Report, 2010). Pricing for coffee pods is similar on a per unit basis ranging from $0.36 to $0.87 depending on brand preference (Repanich, 2010). The brewers vary in pricing, but range from just around $100 to well over $500. At the moment, GMCR is benefiting from significant brand recognition of the Keurig product line in the United States. Keurig has over 70% of the market share, dwarfing the competitors, so much so that Starbucks dumped Tassimo, which had a mere 2%, in favor of Keurig (Helm, Jan 2011) earlier this year. Starting next year, Keurig brewers will appear in Starbucks stores, further strengthening the brand (Chase, March 2011). Starbucks research showed that more 80% of their current customers did not yet own a single-brewer system (Starbucks, March 2011), hinting at an avenue of growth. It is
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