Keurig Case
KEURIG CASE
1 - How do Keurig and its partners make money? (You can find information on the sources of profit for Keurig, coffee roasters, and the KADs from the case.)
Ans:
Keurig made money some amount of money by selling the brewers from a price range of $500 - $1000.Keurig also made a royalty of $0.04 per K-cup sold.
Coffee roasters earned $0.25 per K-cup and KAD made money by selling this K-cup at a mark-up price of $0.40 - $0.50. They also at times charged a small rent.
2 - Should Keurig use a single K-Cup for all markets or should it launch the Keurig-Cup in the at-home market and continue to use the K-Cup in the commercial market? Ans. Even after having few problems in two cup approach I will go with the single cup approach due to following reasons : 1. Roasters will not have to keep two multiple inventories.Will increase production due to two segments. 2. No confusion for customers. 3. Sales channel is easy and will allow quick entry. 4. Theft should be a concern but not a very big issue as it will not happen a lot 5. Early entry in the market might help Keurig to work on lowering costs Ignoring few issues which are of concern it will be better to use the same cup.
3- What price for the brewer and for the portion pack (K-Cup/Keurig-Cup) do you recommend? Under your pricing strategy, how profitable are coffee sales for Keirig? How do coffee profits affect the brewer price? Note: Answering this set of questions requires extensive analysis. Ans: Cup Pricing : After using exhibit 7 A, 7B and 7C we know that people who drink 2 or more cups of coffee are willing to pay more than people who drink 1 cup. They are also the ones who will pay higher for the brewers - $130 and more. Charging $0.55 per cup will be ideal as there is a willingness to pay. Still regular coffee drinkers will save a huge amount of money.Also making a 30 cents profit will help to reduce the cost of the brewer.It
1 - How do Keurig and its partners make money? (You can find information on the sources of profit for Keurig, coffee roasters, and the KADs from the case.)
Ans:
Keurig made money some amount of money by selling the brewers from a price range of $500 - $1000.Keurig also made a royalty of $0.04 per K-cup sold.
Coffee roasters earned $0.25 per K-cup and KAD made money by selling this K-cup at a mark-up price of $0.40 - $0.50. They also at times charged a small rent.
2 - Should Keurig use a single K-Cup for all markets or should it launch the Keurig-Cup in the at-home market and continue to use the K-Cup in the commercial market? Ans. Even after having few problems in two cup approach I will go with the single cup approach due to following reasons : 1. Roasters will not have to keep two multiple inventories.Will increase production due to two segments. 2. No confusion for customers. 3. Sales channel is easy and will allow quick entry. 4. Theft should be a concern but not a very big issue as it will not happen a lot 5. Early entry in the market might help Keurig to work on lowering costs Ignoring few issues which are of concern it will be better to use the same cup.
3- What price for the brewer and for the portion pack (K-Cup/Keurig-Cup) do you recommend? Under your pricing strategy, how profitable are coffee sales for Keirig? How do coffee profits affect the brewer price? Note: Answering this set of questions requires extensive analysis. Ans: Cup Pricing : After using exhibit 7 A, 7B and 7C we know that people who drink 2 or more cups of coffee are willing to pay more than people who drink 1 cup. They are also the ones who will pay higher for the brewers - $130 and more. Charging $0.55 per cup will be ideal as there is a willingness to pay. Still regular coffee drinkers will save a huge amount of money.Also making a 30 cents profit will help to reduce the cost of the brewer.It