K-Cups and Single Serving Systems Soar/Shift from Coffee Sector to Soft Drinks as Consumers Continue to be Willing to Pay for Convenience

Keurig Green Mountain, Inc., a firm based in Waterbury, Vermont, helped to revolutionize the coffee market with its increasingly popular K-Cups. These K-Cups can be placed, one at a time, into special home brewing units to quickly make one serving of freshly brewed coffee. K-Cups have a small, hard plastic shell which contains an appropriate amount of coffee plus a tiny filter. The concept is based on convenience: no cleanup, no coffee grounds to dump, a quick brewing time, and the ability to choose from a wide variety of flavors, geographical sources and caffeine contents. Compared to brewing ground coffee in the traditional manner, K-cups are expensive (roughly fifty cents per cup), but people seem quite willing to pay for the convenience. The phenomenon has spread widely throughout both homes and offices in many nations worldwide, and Keurig has a long list of eager competitors.

In addition to coffee, K-Cups are offered filled with other beverages that brew in hot water, such as tea and hot cocoa. A very wide number of food and coffee firms offer K-Cup style, single-serving coffees, including Gloria Jean and Starbucks.

In early 2014 the single-serving trend took a big leap forward when Coca-Cola announced it would pay $1.25 billion for a 10% stake in Keurig Green Mountain. The soft drink company then raised its stake to 16% in mid-2014. Coke partnered with the company to offer single-serving, branded soft drinks, dispensed from special machines. Launched in 2015 and called KOLD, the machine was capable of producing dozens of varieties of chilled, single-serving drinks, including Coca-Cola products. However, consumers lacked interest, largely due to the high per-drink cost, and the firm dropped the product in mid-2016. It offered a full refund to the small number of people who had purchased a KOLD machine. Earlier in 2016, Keurig Green Mountain was acquired by food investment firm JAB Holding Company.

In partnership with Campbell Soup Company, K-Cup pods for Campbell’s Fresh-Brewed Soup were launched in 2015. That December, Keurig Green Mountain announced that it would be acquired by JAB Holding Company, the investment arm of Joh. A. Benckiser GmbH.

By 2015, about 27% of consumers in the U.S. own single-serve coffee brewers, according to the National Coffee Association of the USA. Another 12% of respondents surveyed by the association said they had “definite” or “probable” plans to purchase the machines. This will have a major impact on coffee sales, since it will significantly reduce coffee waste normally produced when consumers make more coffee than they actually drink in traditional coffee makers.

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