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Coffee and changes in demand
Keurig business analysis
Keurig case study
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Introduction How many times have you ever said to a new or old acquaintance do you want to grab a cup of coffee? Coffee is a drink where we can get to know someone better or just sip while catching up. The latest Hoover’s (2015) market research Keurig Green Mountain is the third largest manufacturer and distributor of coffee and coffee-related products behind both Starbucks and Nestle. Single-cup coffee is experiencing growth, and Keurig Green Mountain built their business on the single-cup concept. The increase in demand for the near future makes now the perfect time to expand. To capture greater market share and to rebound from a disappointing 2015, Keurig Green Mountain is considering increasing their operations into Ethiopia. This …show more content…
Keurig Green Mountain is the market leader in single-cup coffee, but face the challenge of rebounding from a challenging year. Their financial strength and market position along with the goals of reducing costs and increasing sales make now an ideal time to grow.
Justification
Keurig Green Mountain has justification to expand their operations into Ethiopia because of a variety of factors. The United States Department of Agriculture (2015) reports seventy-five percent of exported coffee comes from either Brazil, Vietnam, or Indonesia. Brazil and Costa Rica are reducing their harvests of Arabica beans that go into the Keurig Green Mountain pods. The past decade in Ethiopia doubled their coffee production and experienced nine years of encouraging annual growth (The United States Department of Agriculture, 2015). These mitigating factors make now an ideal time for Keurig Green Mountain to consider expanding if it is
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There are many variables, but projections confirm coffee consumption is on the rise. The potential growth, reduction in costs, and the small investment in expanding indicate they could more than recoup their investment. Keurig Green Mountain needs to consider whether either an internal or external investment is the prudent choice. They should explore the possibility and feasibility of buying a competitor in contrast to building a new facility. Regardless of their decision, Keurig Green Mountain can grow and need to determine the best route to
Geoff Herzog is the product manager for coffee development at Kraft Foods Canada. After reviewing successful results of single-serve coffee pod systems, he wondered whether it would be successful in other areas. It was July 6, 2004, and Herzog had just learned that Kraft Foods North America was planning an aggressive launch of coffee pods in the United States. He then had only a month to decide whether or not the company should proceed with a simultaneous launch in Canada, or await the U.S. results.
The founders of Keurig Inc. created the company to develop an innovative technique which allows customers to brew one perfect cup of gourmet coffee at a time. In this case, the CEO Nick Lazaris along with the other leaders of Keurig Inc. must determine how to successfully enter the at-home-market for use at customers’ homes, while maintaining a healthy relationship with Green Mountain Coffee Roasters, Inc. (GMCR) and Van Houtte. GMCR and Van Houtte are two of the company’s main roaster partners that own a 70% stake in Keurig, so they want the business to succeed but are a little apprehensive about the company’s marketing and pricing strategies.
3-2. Are the critics overreacting to the situation? Do you think Keurig Green Mountain’s managers are handling this situation in the best way, ethically and responsibly? What else could they do to be more ethical and responsible?
The most important part of the cup of coffee, the coffee beans, is typically harvested from South America, mainly because of the fact that Starbucks uses Arabica beans (Weinberg 1), which is dependent on a temperate climate that exists on the majority of the continent. The country that provides the biggest market supply of coffee beans for Starbucks is Brazil ...
Green Mountain Coffee Roasters initially got started in 1981 as a small café in Waitsfield Vermont and united with Keurig later in 2006. The company produces specialty coffee as well as coffee makers with the help of Keurig whom produces single-cup coffee and tea makers; it is now among their product list. The company roasts 100% Arabica type of coffee transforming it into more than a hundred different coffee products available for selection. Green Mountain Coffee Roasters and Keurig coffee no longer retains ownership of the original café. However, the company still has its headquarters situated in Waitsfield Vermont on a vase land of about 90,000 square feet. (8,400 square meters). The company also prides on having other regional centers which are located in various cities including: Upstate New York, Washington, Maine, Massachusetts and Connecticut. According to the case study, “Exhibit 6 shows the net sales and growth in reference to the year 2008, 2009 and 2010” (C36 in the book, [Dess et al, 2012]). From that data, we can see how the company has developed. The rest of the 2010 annual report also helps in examining the performance of the company which can be seen in Exhibits 3, 4 and 5.
In the beginning of 2002, coffee-machine manufacturer Keurig Incorporated was a privately held company worth a little over twenty million dollars in revenues. In 2003, John Whoriskey, vice president and general manager of Keurig Incorporated At Home division, launched their very first single-serve coffee machine (Keurig B100), which provided more than seventy-five variety of flavors of coffee, to compete with the At Home (AH) marketplace. The company then faced many challenges which was for example manufacturing costs and creating a retail launch strategy. Moving forward to 2011, Keurig is now a wholly owned subsidiary of Green Mountain Coffee Roasters, Inc., which was a publicly traded company with market capitalization of between eight
Another consumer trend that could support the potential success of the Kold machine is the relationship it will have with other well known brands such as Coca-Cola. Consumers are likely to purchase products they already know, and the Coca-Cola brand is very well known throughout the world. Some factors from the external marketing environment that could hinder the success of the Kold machine is competition and social/cultural forces. The Kold machine will face its strongest competitor in SodaStream, which already has been available for quite some time. Even though Mr. Kelly (Keurig'c CEO) mentioned having surpassed competitors in the past this might be a different scenario. SodaStream might have already took most of the market away as analysts are stating it will be more expensive buying Kold pods than buying a can or bottle at the grocery store. These statements will most likely not help growth the industry as much as Mr. Kelly things. Another factor that could hinder the success of the Kold machine is the social and cultural
In addition to being best-known supplier of the finest coffee and promising only the highest quality products, Starbucks emphasizes firm values, provides guidelines to enhance employee self-esteem. This is to ensure continued customer satisfaction. Moreover, diversity has become a priority to providing an inviting environment to all consumers. Starbucks continues to abide by a strict, slow growth policy in which they set out to dominate a market before moving on to expand, thus history has shown this strategy to be successful for Starbucks, making them one the fastest growing companies nationwide.
Coffee is a worldwide cash crop of which demand has exponentially increased over the years. “Coffee is (after oil) the world’s second most important traded commodity” (Cleaver 61). Competing coffee brewing companies wage war on offering the freshest, best tasting coffee the market has to offer. With such stiff competition there must be enough coffee beans deemed to be good enough in quality to supply the increasing demand. Starbucks can be considered one of today’s top competitors if not thee top coffee manufacturer presently in business. This successful company has had a huge impact on the coffee industry as well as the world. They have gone through great length to provide consumers with an excellent product as well as create a legacy that shows how to best go about running a massive corporation while keeping the environment clean and healthy.
As mention earlier Starbucks has many opportunities of which it can take advantage. These include a joint venture with McDonald’s, where the restaurant giant would supply its customers with Starbucks coffee. Another is the bottled Frappuccino product that Pepsi and Starbucks have created. This has had a very positive response in the test markets and posses to be a lucrative option. Starbucks could also look at the vertical integration possibility of producing its own beans. This could prove to be very successful if they can capture a significant amount of the production they could become a price setter in the coffee commodities. Also because small coffee retail outlets are so trendy it is possible for them to set ...
In the United States, coffee is the second largest import (Roosevelt, 2004). Furthermore, the United States, consumes one-fifth of all the worlds¡¦ coffee (Global Exchange, 2004). The present industry is expanding. It is estimated that North America¡¦s sector will reach saturation levels within 5 year (Datamonitor. n.d.). According to National Coffee Association (NCA), 8 out of 10 Americans consume coffee. In addition, it is estimated that half of the American population drinks coffee daily. The international market remains highly competitive. It is estimated that 3,300 cups of coffee are consumed every second of the day worldwide (Ecomall, n.d.). The latest trends included dual drinkers, an increase in senior citizens...
Bruss (2001) argues that the company hopes as well to make new investments in new coffee types. Starbucks has recently developed a new type of coffee called green-coffee. These strategies are created with the objective of support Starbucks’ commitment to buy coffee that has grown and processed by suppliers. They meet certain conditions of social, economic and quality standards. In addition to that, the company is paying additional premiums to those vendors who meet the specific requirements that the company wants.
Usually that revenue growth is in line with the growth of the economy”. I believe there are thousands of students contributing to Starbucks 's growth today. “As a result, mature companies tend to engage more in inorganic growth to fuel innovation. That means acquiring start-ups or middle-sized companies”. Not all products have been a home run for Starbucks. A lot of their flavored lattes, recipe process, technology endeavors have been part of the declining stage as well. However, Starbucks does have product extension for some items and they tend to return them ever so often due to holiday or
When comes to Economic aspect, coffee is the second most traded product in the world after petroleum. As the country’s economy is dependent on agriculture, which accounts for about 45 percent of the GDP, 90 percent of exports and 80 percent of total employment, coffee is one of the most important commodities to the Ethiopian economy. It has always been the country’s most important cash crop and largest export commodity. (Zelalem Tesera p
Starbucks has identified high value opportunity in China, India, Brazil and Japan. The large expansion opportunity of twelve billion in China alone is enough to drive Starbucks to expand globally. The organization has planned to double its footprint to 3000 stores in China by 2019 ("Starbucks Details Five-Year Plan to Accelerate Profitable Growth", 2014). Starbucks realizes that eventually there will be a diminishing return on their existing market within the US due to market maturity and there are only two ways to expand through diversification in their offerings and entering new markets. Given the international opportunity for growth and expansive tea market in Asia, the company will enjoy the benefits of the growth opportunity. Management’s decision to continue to grow globally is a driving force that has yielded