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Inside Keurig’s evolution from single-serve novelty to brewer of coffeehouse-style drinks


Once celebrated as a pioneer with its single-serve coffee pods, the future of the popular Keurig platform is increasingly built around its ability to replicate an array of coffeehouse-style drinks for a demanding consumer.

“We’ve come a long way from just making sure that you had a faithful reproduction of a cherished brand in a hot black cup of coffee,” Patrick Minogue, president of U.S. coffee for Keurig Dr Pepper, said in an interview.

Consumers, he added, have become more demanding and have higher expectations for Keurig than ever before. “That keeps us honest and keeps us innovating,” Minogue said. 

Keurig’s roots go back three decades when two engineers approached Green Mountain Coffee Roasters about developing a single-cup brewing system. They called their company “Keurig,” derived from the Dutch word for excellence. The first test brewer, the Concept 1, was sold in 1995 for $15,000, with only three models ever made.

K-Cup coffee packs on display in Florida.

Optional Caption

Joe Raedle via Getty Images

 

Today, Keurig, which is owned by beverage giant Keurig Dr Pepper, has just under 40 million households using its coffee brewing system. Executives estimate there are more than 50 million new households Keurig could eventually add to its platform.

Minogue said attracting new drinkers to the Keurig platform has proven to be a challenge as the brand matures, placing an impetus on adding new features that go beyond simply replicating a single cup of coffee. 

With competition from other brands, such as Nestlé’s Nespresso, along with coffeehouse stalwarts like Starbucks and countless smaller independent chains, executives at Keurig are cognizant of the fact that they can’t afford to sit idle.

Consumers want their machines to replicate the premium, high-quality coffees they purchase outside of the home, with more choice and at an affordable price, Minogue said. 

During the past seven years, Keurig has incorporated features including the ability to add froth, produce both hot and cold drinks on the same machine and replicate a highly caffeinated beverage like an espresso, into new product launches.

Cold coffee heating up

So far, it appears Keurig’s strategy is paying off. The brand, with recognition topping 90%, posted its ninth straight year of market share gains in 2023, according to parent Keurig Dr Pepper. Currently, a third of all coffeemakers being sold in the U.S. are Keurig or Keurig-compatible models.

Garrett Nelson, an analyst with CFRA, said Keurig will continue to prioritize innovation and incorporate features that consumers are looking for into the system. “It’s a very competitive space,” Nelson said. “That’s going to be key going forward, continuing to come out with better, more efficient products.”  

The coffee business also has been a boon for Keurig Dr Pepper, which similar to PepsiCo and Coca-Cola, has seen softening demand in soft drinks as consumers cut back on sugar. Keurig, he said, provides “a level of stability” for the “significant headwinds” the beverage giant is facing in other parts of its business. 

Keurig Dr Pepper, coffee, K-cups

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Courtesy of Keurig Dr Pepper

 

While Keurig is most closely associated with hot beverages, the coffee maker has made inroads in recent years to implement cold brewing features into its platform — which are especially popular among younger drinkers.

Carlos Laboy, an analyst with HSBC, noted in a December report that the trend of consumers moving from cold coffee to hot “offers growth potential” for an already strong brand.

He said Keurig has a high penetration rate in hot coffee-drinking households, “unmatched” scale of coffee pod manufacturing and a strong portfolio of brands. In addition, Keurig possesses a national sales and distribution reach for its coffee makers and pods and an approach to designing new digitally connected brewers that resonate with consumers.

“Having changed the at-home hot coffee pot habit, Keurig’s next disruptive growth phase is starting as it adjusts its platform and rolls out new designs of affordable coffee makers for at-home cold coffee occasions,” Laboy noted.

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