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New Challenges for K-Cup Maker Keurig and Green Mountain Coffee

From the Boston Globe comes this example of the importance of technology strategy and intellectual property strategy to maintaining a company’s leading market share and share-price:

Expiring patents on Keurig (a division of Green Mountain Coffee) the inventor and manufacturer of popular K-Cup single-serving pod and other issues are clouding the Vermont company’s future.

K-Cups, which produce one cup of coffee at a time in Green Mountain’s Keurig brewers, are the most profitable segment of the company’s business, accounting for about three-quarters of its net sales. But when the K-Cup patents expire this fall, a stream of grocery and retail stores are expected to produce lower-priced, store-brand coffee pods that can be used in Keurig machines and cut into Green Mountain’s earnings.  On Monday, Kroger Co., of Cincinnati, one of the largest US grocery store operators, announced that it would sell its own private-label version of the K-Cup later this year.

“You’re going to have any company that wants to . . . make K-Cups and put them on store shelves and not have to pay Green Mountain anything,” said Mark Astrachan, a managing director at Stifel, Nicolaus & Co., a financial services firm based in St. Louis.

David Einhorn, president of the New York investment management firm Greenlight Capital Inc., also hammered Green Mountain in a presentation to investors last fall, focusing on patent expiration, limits to the single-serve market, and what he called the company’s “questionable business practices,”…

 

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