Competition in the single cup brewing system market was increasing as

Competition in the single cup brewing system market

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Competition in the single-cup brewing system market was increasing, as relatively low barriers to entry encouraged new competitors to enter the market, particularly with typically lower-cost brewers that brewed coffee packaged in nonpatented pods. Many current and potential competitors had substantially greater financial, marketing, and operating resources versus Keurig. According to Keurig, their primary competitors were Flavia Beverage Systems (manufactured by Mars), the Tassimo beverage system (manufactured and marketed by Kraft), the Senso brewing system (manufactured and marketed by Philips and Sara Lee), and a number of additional single-cup brewing systems and brands. Kraft’s Tassimo system was made primarily for at-home use, while the Mars’s Flavia system targeted offices. A January 2009 Consumer Reports article on coffeemakers covered pod machines. The article stated, “With pod machines, you simply drop in a sealed packet of coffee—no grinding, no scooping, and no mess. But many lock you into the company’s coffee, which tends to be pricey, and the results have been unimpressive.” According to Consumer Reports, “Cuisinart’s Cup-O-Matic SS-1, $200, did best among the pod models tested. It took standard pods or your own grind and lets you pick regular or bold in five cup sizes. It was reasonably quick: about three minutes for the first cup,
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one minute thereafter. But the model occasionally leaked extra water into the cup, diluting the coffee.” Consumer Reports also tested the Keurig Breville BKC600XL, $300. Consumer Reports commented that the Keurig machine, “accepts any K-cup as well as loose coffee grounds. It was fairly quiet but that first cup takes almost four minutes.” Consumer Reports recommended, “If you want coffee for one in a hurry and you insist on the neatness and convenience of a pod machine, consider the Cuisinart for its flexibility and speed. Otherwise, we recommend our top-scoring to-go model, the Melitta Take2 ME2TM. It’s quick, brewed superbly, and costs just $25.” The History of Keurig Named for the Dutch word for excellence, Keurig was launched in 1990 by Peter Dragone and John Sylvan, with the belief that coffee should always be served fresh, whether at home or at the office, just as in a gourmet coffeehouse. Dragone and Sylvan noticed that people were leaving the office in search of a fresh cup of coffee and asked themselves, “Why do we brew coffee by the pot when we drink it by the cup?” From this question, the revolutionary concept of Keurig K-Cup portion pack brewing was born. In 1994 Keurig secured a patent and came up with a prototype. Two venture capital firms kicked in $1 million and gave Dragone and Sylvan one year to prepare a model for mass
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production. When they missed that deadline, the venture capitalists offered more money but demanded that Nick Lazaris, a veteran executive who once served as chief of staff to West Virginia Governor (now Senator) Jay Rockefeller, be brought on. In 1998, after eight years of development, Keurig
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  • Spring '16
  • Harry Purcell

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