Green Mountain Coffee Roasters and Keurig Coffee

Green Mountain Coffee Roasters and Keurig Coffee

Homework: Case Analysis

Please read the Green Mountain Coffee Roasters and Keurig Coffee (C36) case analysis carefully and produce a case analysis report, following the instructions that are given in the Case Analysis report document in Doc Sharing. The following is from Doc Sharing:

Case Study Report
Outline and Grading Guide (150 points)

COMPANY NAME/WEBSITE/INDUSTRY
State the company name, website address and industry

BACKGROUND/HISTORY
Briefly describe the company in the case study. What is their primary business, who were the officers or key players described in the case study? If the case study company is currently in business, list the company’s current CEO, total sales and profit or loss for the last year where data is available. Identify key events or phases in the company’s history. Describe the performance of this company in the industry. Visit the company’s website and use http://finance.yahoo.com and or some other financial search engine to find this data. (25 points)

NOTE: Make sure to use APA citations throughout the paper. The textbook should be cited if it is the source of information. If you are not familiar with APA citation, check out the tutorial “APA Guidelines for Citing Sources” at the end of the course syllabus. There are videos to help you with the APA format and business research in the week 1 lecture. 

SWOT ANALYSIS
Using the information in the case study, perform a SWOT analysis on this company. Remember Strengths and Weaknesses are internal to the company. Opportunities and threats lie outside of the company and are in the external environment. Summarize your key points in a SWOT matrix. (25 points)

ANALYSIS VIA PORTER’S FIVE FORCES MODEL
Analyze the competitive environment by listing the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in the industry (Chapter 2). Summarize your key points in a Figure. (25 points)

STRATEGY USED
How does this company create and sustain a competitive advantage? What strategy was undertaken by this company? Were they successful? Can all companies use this strategy? How is the strategy affected by the life cycle in the industry? Remember to reference Porter’s generic strategies identified in Chapter 5 of the textbook. (20 points)

THE ISSUES AND CHALLENGES FACING THIS COMPANY 
Can the company’s competitive advantage be sustained? How will that be accomplished? Where are they in the product life cycle? What is the company culture like? Do they need to change it? What problems is this company having and why? (20 points)

COURSE OF ACTION RECOMMENDED
If you were in a position to advise this company, what strategy would you recommend to sustain competitive advantage and achieve future growth? Be specific and list the steps the company should take for successful implementation of your course of action. (20 points)

OPINION
What do you think of this case study? Describe what you believe are the lessons learned from this case. (10 points)

REFERENCES
When you have completed the paper using the above sections, insert a page break and have a separate references page. The references should be listed in accordance with the APA guidelines as shown in the tutorial. (5 points)

FORMAT:
• Do not use a cover page.

• Font: Use Times New Roman, 12 point.

• Place your name in the upper left hand corner of the page.

• Each section of your paper should be headed by the bolded, capitalized item described above. 

• Indent paragraphs.

• Insert page numbers bottom right.

• Limit the paper to no more than 4 double spaced pages.

• Use APA citations throughout the paper. If you are not familiar with APA citation, refer to tutorial, which is contained in the last section of our course syllabus.

• Include a separate “References” page at the end of the paper (This is not one of the 4 pages).

• Please prepare reference page as follows:

References

Dess, G., Lumpkin, G. & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.


• Save your paper in the following format: Your last name your initials and the company discussed in the case study
EXAMPLE: If your name is Edward R Jones and you are writing a case study on Google, then the file name for your paper would be jonesergoogle.doc

• Place the paper in the drop box designated by the weekly assignment.

Note that the report is worth 150 points and points are allocated for each section as noted in the outline. 


Case 36: Green Mountain Coffee Roasters and Keurig Coffee*

On March 10, 2011, Starbucks and Green Mountain Coffee Roasters (GMCR) announced the formation of a strategic relationship for the manufacturing, marketing, distribution, and sale of Starbucks and Tazotea branded K-Cup portion packs for use in GMCR’s Keurig single-cup brewing system. The new relationship was designed to provide owners of Keurig single-cup brewers with the additional choice of Starbucks-branded super-premium coffees for their brewers. This strategic relationship furthered Starbucks’s stated goals of expanding its presence in premium single-cup coffee, making its premium coffees conveniently available to consumers whenever, wherever, and however they wanted it. Howard Schultz, president, CEO, and chairman of Starbucks Corporation stated,

Today’s announcement is a win for Starbucks, a win for GMCR and most importantly a win for consumers who want to enjoy Starbucks coffee with the Keurig Single-Cup Brewing system. Our research shows that more than 80 percent of current Starbucks customers in the U.S. do not yet own a single-cup brewer and our relationship will enable Starbucks customers to enjoy perfectly brewed Starbucks coffee at home, one cup at a time.

Jeff Hansberry, president, Starbucks Global Consumer Products Group, added, “We are proud to be the exclusive super-premium licensed coffee brand produced by GMCR for the Keurig Single-Cup Brewing system, and we are looking forward to working with our colleagues at GMCR to further accelerate growth in single-serve coffee.” Lawrence J. Blanford, GMCR president and CEO stated, “This relationship is yet another example of GMCR’s strategy of aligning with the strongest coffee brands to support a range of consumer choice and taste profiles in our innovative Keurig Single-Cup Brewing system.”1

GMCR appeared on a roll with the Starbucks development following similar news in February with Dunkin’ Donuts announcing a promotion, manufacturing, and distribution agreement making Dunkin’ Donuts coffee available in single-serve K-Cup portion packs for use with Keurig Brewers.2 Beginning in the summer of 2011, Dunkin’ Donuts will offer 14-count boxes of Dunkin’ Donuts coffee in single-serve K-Cup portion packs exclusively at participating Dunkin’ Donuts restaurants in the United States and Canada. GMCR will exclusively package the new Dunkin’ K-Cup portion packs using coffee sourced and roasted to Dunkin’ Donuts exacting specifications. Nigel Travis, Dunkin’ Brands CEO and Dunkin’ Donuts president stated,

We believe customers will be delighted to learn that ‘America’s Favorite Coffee’ will soon be able to be prepared in America’s fastest-growing single-cup brewing system. By introducing Dunkin’ K-Cup portion packs and making them available exclusively in our restaurants, we are giving people more occasions to enjoy Dunkin’ Donuts coffee and more ways to enjoy using the Keurig Single-Cup Brewing System. We believe this alliance of two brand leaders means incremental sales of GMCR, for Dunkin’ Donuts and for our Dunkin’ Donuts franchisees.

GMCR president and CEO Larry Blanford stated,

Dunkin’ Donuts has top quality coffee, an extremely loyal customer base and impactful advertising programs. Combine those assets with consumers’ enthusiastic response to Keurig’s Single-Cup Brewing technology and we believe this alliance represents a truly exciting opportunity for both companies, with the potential to strengthen Keurig brewer adoption by consumers in one of the fastest-growing categories of the coffee industry.

According to The NPD Group/CREST, Dunkin’ Donuts served the most hot traditional and iced coffee in America (for quick-serve restaurants, year ending October 2010), selling more than one billion cups of hot and iced coffee every year. Dunkin’ Donuts was recently ranked number one in customer loyalty in the coffee category for the fifth consecutive year by the 2010 Brand Keys Customer Loyalty Engagement Index. Additionally, in 2010 Dunkin’ Donuts opened more net new locations globally than any other quick-serve brand.

While Wall Street rewarded the stock price of GMCR on the news of the strategic relationships, Larry Blanford could not ignore the risks related to GMCR’s Keurig business. Although GMCR was based in Waterbury, Vermont, with a geographic footprint weighted almost exclusively to the U.S. and Canada, several global developments posed risks to Keurig’s future growth. Blanford was concerned about several issues. including product liability, protecting GMCR’s intellectual property, GMCR’s ability to integrate their acquisitions, and the effect of commodity costs on Keurig brewers.
Coffee Consumption in the United States

The U.S. population consumed more coffee than soft drinks in 1969. According to Jack Maxwell of Beverage Digest, U.S. consumption of coffee in 1969 was approximately 40 gallons per capita versus 20 gallons of soft drinks. By 1998, coffee consumption had fallen to 20 gallons per capita annually compared to more than 50 gallons of soft drinks consumed. But consumer preferences can and did change, responding to the availability of higher-quality coffee by drinking more coffee and reversing a three-decade decline. The National Coffee Association conducted a survey revealing that 80 percent of Americans drink coffee occasionally and over 50 percent drink coffee daily. The U.S. per capita consumption of coffee was estimated to be 424 servings, which included in-home and out-of-home consumption of roast, ground, instant, and ready-to-drink (bottled/canned) coffee.3 While the average consumption per drinker rose to over three cups per day, 18- to 24-year-olds who drink coffee averaged 4.6 cups per day, whereas those over 60 years old averaged only 2.8 cups per day.4

The total coffee market in 2010 was estimated to be 105 billion cups or $34 billion (see Exhibit 1).5 Specialty coffee has become a mainstream staple as younger drinkers have come of age with Starbucks virtually omnipresent. Given the proliferation of specialty coffee and a palate less tolerant of Robusta coffee from a can, the Millennial Generation provides a robust outlook for specialty coffee demand (see Exhibit 2).

Exhibit 1: Total U.S. Coffee Market Value
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The Keurig K-Cup Single-Serve Brewing System

Keurig single-serve systems are designed to quickly brew a single cup of coffee, tea, hot chocolate, or other hot beverage such as apple cider. The coffee grounds or other brew material are supplied in a prepared, single-serving unit called a “K-Cup.” Once the brewer has warmed up, the Keurig user inserts a K-Cup into the brewer, places a mug under the spout, and invokes the brew feature. Within 20 to 60 seconds, the beverage is brewed. Keurig machines brew by piercing the foil seal on top of the plastic K-Cup with a spray nozzle, while simultaneously piercing the bottom of the K-cup with a discharge nozzle. Grounds contained inside the K-cup are embedded within a paper filter. A measured quantity of hot water is forced through the K-Cup, passing through the brew material and the filter into a cup or mug. A brewing temperature of 192 degrees Fahrenheit (89 Celsius) is the default setting, with some models permitting users to reduce the temperature per preference.

“Pod” Brewing Market

The Keurig brewer utilizes patented, innovative brewing and single-cup technology to deliver a fresh-brewed cup of coffee, tea, or cocoa at the touch of a button. Brewers with Keurig Brewed technology were the top five selling coffeemakers in the United States on a dollar basis for the period of October through December 2010 and represented 49 percent of total coffeemaker dollar sales for that period according to the NPD Group. At the KeyBanc Capital Markets investor presentation, Larry Blanford reported that Keurig brewer and accessories sales increased 58 percent in the first quarter of 2011 versus first quarter 2010. During this same time period, K-Cup portion pack net sales increased 89 percent to $332.9 million. As a percentage of total coffeemaker dollar sales, Keurig’s percentage has increased quarter on quarter every quarter since 2007 (see Exhibits 3-6).
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Note: Includes all coffeemakers and espresso makers. NPD data do not include all retailers and are estimated to represent 35 percent to 40 percent of the total marketplace.

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Exhibit 6: Segment Summary

Specialty Coffee business unit(SCBU): Sources, produces, and sells more than 200 varieties of coffee, cocoa, teas, and other beverages in K-Cup portion packs and coffee in more traditional packaging, including whole bean and ground coffee selections in bags and ground coffee in fractional packs, for use both at-home (AH) and away-from-home (AFH). In addition, SCBU sells Keurig single-cup brewers and other accessories directly to consumers and to supermarkets.

Keurig: Sells AH single-cup brewers and accessories and coffee, tea, cocoa, and other beverages in K-Cup portion packs produced by SCBU and other licensed roasters to retailers by principally processing its sales orders through fulfillment entities for the AH channels. Keurig sells AFH single-cup brewers to distributors for use in offices. Keurig also sells AH brewers, a limited number of AFH brewers and K-Cup portion packs directly to consumers via its website, www.keurig.com.