Solution Practice Comprehensive Exam

Case: Keurig Coffee

Executive Summary
The case tells the success story of Keurig, a manufacturer of Coffee Brewer makers based in US.
The Coffee Brewers cater to different categories for customers catering to both Home and
Office categories. Keurig is owned by Green Mountain Coffee Roasters (GMCR), and has been a
successful transformation in past 10 years or so.

Keurig started in year 1990 by two Entrepreneurs Peter Dragone and John Sylvan. Their idea
was to make the coffee into the cups directly by brewing it into a machine, rather than a pot.
The funding for the manufacturing was done by two Venture Capital firms amounting to 1
million USD. When they failed to achieve a milestone, Nick Lazaris was brought in by the VCs to
lead the charge. In 1998, the first single cup coffee machine was introduced by Keurig and has
been a success ever since then.

The company has seen some transformations with Keurig and GMCR running a partnership for a
few years which went onto other investors joining the pie. Some mergers also took place by
GMCR after the Keurig takeover. Keurig has been increasing its sales especially in the past 5
years. Keurig caters to its customers by selling different types of Brewers and K cups, a patented
product used in a Brewer for making coffee and tea. Numerous patents are held by the
company in portion packs, packaging line, and brewer technology.

The excellence of Keurig has been due to a combination of strong leadership, strategic mergers
and acquisitions, responsiveness to customer needs, innovation, entrepreneurship, sales
strategies, and other practices. Ending 2008, more than 2 billion K cups have been sold as well
as thousands of Brewers. Strong R&D has always been a keen focus of Keurig, and the first
mover advantage in single serving coffee brewers have fueled their path to success. They are
the market leaders in the home based customer orientation and are paving ways of making a
mark in the commercial sector.

The case tells about the change in leadership that has happened at Keurig, with Michelle Stacey
taking over as the CEO of the company after Lazaris resigned. The management is keen on
transforming the company from a technology oriented to a market driven company, and this
kind of change is not new to the new CEO. She would not only have to manage and carry the
reputation of the Keurig brand, but also to explore new ways of continuing success while
keeping growing competition at a bay.
Financial Performance and Sales

Some useful ratios to gauge the financial performance of Keurig are:

Growth Ratios

Ratio 1998 1997 1996 1995 1994

Net Sales 46% 52% 39% 18%
Net Income 74% 52% -6% 14%
EPS 67% 44% -8% 11%