Business

Keurig backs down on K-Cup coffee pod strategy

Keurig Green Mountain slashed its full-year sales and profit forecasts, and apologized to customers for the way it launched its recent coffee machine - forcing them to buy the company's exclusive pods.

Coffee company relents and will allow customers to use pods from other companies

Keurig Green Mountain slashed its full-year sales and profit forecasts, and apologized to customers for the way it launched its recent coffee machine - forcing them to buy the company's exclusive pods.

Keurig Green Mountain Inc. on Thursday also offered quarterly numbers that updated sales figures for its Keurig 2.0 brewing system.

Sales of Keurig brewers have slowed in the past two quarters due to high prices of the 2.0 brewing system, poor initial reviews and confusion over whether the new machine could still brew certain brands.

New strategy

On a quarterly earnings call this week, CEO Brian Kelley said consumers liked using unlicensed pods in its first-generation machine. But such pods were not compatible with the 2.0 system because the company added technology to it that would reject any coffee pod that didn't come with an electronic signature from Keurig — although it was reportedly very easy to trick the system.

Known as DRM (digital rights management), the change became a sore spot for consumers who didn't like having updated their machines only to discover they were then forced to buy certain kinds of coffee — in packages that cost more than four times as much as previous options they had.

"Quite honestly, we were wrong," Kelley was quoted by the Washington Post as saying. "We underestimated the passion the consumer had for this. We missed it. We shouldn't have taken it away. We're bringing it back.

"Some consumers were confused [with the changes]," he said. "We've converted a lot of those unlicensed players into our system."

In addition to angering its own customers, Keurig has become a focus for environmentalists who decry the company for pitching coffee pods that aren't currently recyclable and eventually end up in landfills.

Management changes

The maker of K-Cup single-serve pods also named Peter Leemputte as its chief financial officer and treasurer, succeeding Fran Rathke.

Leemputte, who will take charge on Aug. 17, was chief financial officer of Mead Johnson Nutrition.

Rathke, who has been with Keurig for 12 years, will stay on as a senior adviser until September, Keurig said.

Keurig said it expects full-year net sales to grow in the flat-to-low single-digit percentage range. It had earlier forecast middle to high single-digit percentage growth.

With files from Reuters

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