Amparo María Carrión Ramírez

KEURIG CASE
1. What are the main problems of the Keurig Case? Why?

There are four main problems:

1- They do not have the resources to launch the B100 brewing system through the retail
channel, so they must develop another strategy like direct marketing approach using
an e-commerce-enabled Web site to sell the brewer and K-Cups, and thanks to that
channel problems were encountered.
2- They had to develop a new Keurig-Cup for the at-home market, because of the office
managers’ fear of theft of K-Cups for use at home. So, they had to differentiate these
products which caused new costs.
3- Determine the B100 brewer price for the at-home market, because with the market
research they had done, consumers react favourably to $149-$170 range, but Keurig
not afford to sell at $149 because the costs of manufacture are higher, at $299, there
would be a small profit margin, and at $199, there would be a large loss on brewer
sales, but marketing research had shown this price be more attractive than $200 or
more.
4- The distribution channel, because there are like two channels one for brewer through
small appliance retailers like department stores, and another one for coffee through
grocery stores, gourmet food retailers, and coffee shops. But Keurig’s needs of its
patented single-portion pack presented unique distribution challenges.

2. What are the secondary problems of the Keurig case?

KADs interpret their entry into the at-home market with a direct sales approach as a first step
towards a direct approach in the OCS market in the long term, and would diminish the KADs’
efforts in both the OCS and at-home markets.

Another problem was the manufacturing cost of the new brewer B1000, that was greater than
$300 and also had some significant design issues.