This document analyzes the market for a new single-serve coffee brewer system. It finds that the mass-market coffee sales are flat while gourmet coffee sales are increasing. The document outlines competitors in the space and concludes proprietary coffee grounds systems will be important. A SWOT analysis is presented for two approaches to marketing the coffee pods. The recommended solution is a single "cup approach" selling pods directly and through demonstrations to appeal offices and households. Pricing forecasts and a "pioneer" marketing strategy are outlined.

1. Managing a New Product
Launch
Roy Campos
Robert Forrester
Alysse Tulanowski
At Home
1
Case Study by
Eric T. Anderson

2. Market
Analysis:
Sales
Trends • Takeaways:
• Sales of mass-market coffees
flat or declining
• Sales of gourmet coffee
increasing (40% over 5 years)
2
$0
$1,000
$2,000
$3,000
$4,000
$5,000
1996 1997 1998 1999 2000
Sales(millions)
Year
At-Home Coffee Sales
Mass Market
Coffee Sales
Gourmet
Coffee Sales

3. Market Analysis: Quantity Trends
Takeaways:
Quantities of
mass market
coffee flat
Quantities of
gourmet coffee
increasing (25%
over 5 years)
3
0
100
200
300
400
500
600
700
800
900
1996 1997 1998 1999 2000
Pounds(millions)
Year
At-Home Coffee Quantities
Mass
Market
Coffee
Gourmet
Coffee

4. Market Analysis: Overall Trends
Sales of mass market coffee declining
while quantities remain flat
– Having to reduce price to maintain quantity
– Stable demand, increasing downward price
pressure
Sales and quantity of gourmet coffee
increasing; sales faster than quantity
– Growing market
– Market supporting increasing price point
– Likely a result of increasing popularity of
gourmet coffee shops that charge a premium
4

5. Competition Analysis Data
5
Company System
Coffee
Presentation
Cost for
Brewer
Cost for
coffee
Does it currently
exist?
Melitta One:One filter pods $49 $0.25 New system
Sara Lee
Senseo Coffee
Pod
aluminum
pods
$70
$0.20
(two
required)
Established in
Europe
Proctor &
Gamble
Unknown pods
likely
$50-$70
likely
$0.25-$0.40
New system
Nestle Nespresso
espresso
capsules
unknown unknown
Established as
espresso in Europe,
may migrate to
American-style

6. Competition Analysis Conclusions
All companies utilizing proprietary coffee grounds system
– Creates continuous revenue stream past sale of appliance
Wide variety of different strengths among competition
– All have experience in the small kitchen appliance market
– Some (Sara Lee, Nestle) have direct coffee machine experience
in Europe
– All have channels already established for sales
(Likely) price points for the appliance range from $50-$70
(Likely) price points for the coffee range from $.25-$.40
6

7. Market
Forces
7
No Existing
US
Competitors
Threat of
New
Entrants
Threat of
Substitutes
Bargaining
Power of
Buyers
Bargaining
Power of
Suppliers
CONSIDERATIONS
•Threats ID’ in Table
• Barriers to Entry:
• Distribution Channels
• Hardware Design
• Proprietary coffee pods
CONSIDERATIONS
• Offices concerned about
theft
• KAD’s threatened by direct
channel potential for at-
home K-cups
• Consumers show price
sensitivity
CONSIDERATIONS
• Drip systems
• Coffee houses
CONSIDERATIONS
• Suppliers are large
owner in company
• Must ensure coffee
supply profitability
since coffee will serve
as revenue stream

8. Market Forces Conclusions
8
Suppliers revenue will provide a revenue
stream for us, must make profitable
We likely have the greatest barriers to
entry
– No retail channels established
– Not as much small appliance experience as
most
OCS is currently our primary revenue
stream, must try to maintain this
– Must also understand price sensitivities
and make our system with reach
Being “first to the market” will give us a
(needed) advantage against substitutes
from large competitors

9. Marketing Plan
9
Market Research:
» Intercept surveys
» Internet surveys
» Current OCS user surveys
» Focus groups of at-home test users
– Take Aways
• Customers are interested in quick brewing time and
minimal clean up
• Second was taste consistency and coffee variety
• Demonstration increased likelihood of sale from 75%-
90%
SOLUTION: Find a demonstration driven outlet to
sell through
• Conferences, mass transit stations, airports, trade
shows, shopping malls
CONCLUSION: Keurig has found a niche in the high
priced market because of the variety they offer
» Direct impact on pricing…

10. Brewer Pricing
Forecasts
10
Selling Point
Forecasted
Quantity
Selling
Price Total Revenue
Forecasted
Quantity
Selling
Price
Total
Revenue
Forecasted
Quantity
Selling
Price Total Revenue
Sold Direct 13,000 $170.00 $2,210,000.00 9,100 $249.00$2,265,900.00 6,500 $299.00 $1,943,500.00
Sold Indirect ($50
Promotion Savings) 7,000 $130.00 $910,000.00 4,900 $199.00 $975,100.00 3,500 $249.00 $871,500.00
Small Businesses 3,000 $170.00 $510,000.00 2,100 $249.00 $522,900.00 1,500 $299.00 $448,500.00
TOTAL At-Home
Brewer Shipments 23,000 $3,630,000.00 16,100
$3,763,900.0
0 11,500 $3,263,500.00
Projected
Manufacturing
Costs 23,000 $220.00
-
$5,060,000.00 16,100 $220.00
-
$3,542,000.0
0 11,500 $220.00 -$2,530,000.00
Sunk Costs -$700,000.00 -$700,000.00 -$700,000.00
2003 Forecasted
Brewer Profit
-
$2,130,000.00 -$478,100.00 $33,500.00
K-Cups per day 2.25 $0.30 $0.68 2.25 $0.50 $1.13 2.25 $0.55 $1.24
Weekdays until year
end 2003 92 92 92
K-Cups drank per
day 51,750 $0.30 $15,525.00 36,225 $0.50 $18,112.50 25,875 $0.55 $14,231.25
2003 Forecasted
Cup Profit $1,428,300.00
$1,666,350.0
0 $1,309,275.00
2003 Forecasted
Profit -$701,700.00 $1,188,250.00 $1,342,775.00

11. Solution
Brewer Pricing
– Favorable price = $149 - $170
– Manufacturing costs = $220
B100 price at $249.00
– Do not need to worry about K-Cup sales
making up for lost profit
– Based on VRIO
• Value: HIGH - Exploit at-home single cup brewing
opportunity
• Rareness: HIGH - Pioneer, only at home single cup
brewer available
• Imitability: LOW – Competition working on
comparable product
• Organization: HIGH/AVERAGE – Successful in OCS
Market
11
Keurig B100 Brewer

12. Solution
Cup Pricing
$0.50 per cup
– More cups of coffee per
day = higher price
willing to pay per K-cup
– When Keurig system
was present, more cups
of coffee were drank
per day
• We can assume that
more people will be
willing to pay a higher
price for their K-cups
after experiencing the
system 12
5.1%
16.7%
20.5%
22.0%
28.2%
41.0%
60.3%
14.6%
30.7%
33.6%
41.5%
48.2%
58.5%
75.6%
0.0% 20.0% 40.0% 60.0% 80.0%
0.55
0.50-0.54
0.45-0.49
0.40-0.44
0.35-0.39
0.30-0.34
0.25-0.29
Percentage of Interested Consumers*
CupPricing(Dollars)
K-Cup Pricing Based on Coffee Consumption
2+ Cup/ Day %
1 Cup/ Day %
*Numbers based on customers who were very or somewhat likely to purchase the system

13. SWOT Analysis
Creation of the Keurig Cup
STRENGTHS
 Does not threaten the KADs or the Office
Coffee Service sector
 Attractive to participating OCS managers
o Managers more likely to take part in
“in-office promotions” of the at-home
system
o Prevents theft of K-Cups
 Increase control of pricing
o Allows for different price points
between office and at-home use
 Engineering of brewer is complete
WEAKNESSES
 Increased inventory and costs for coffee
roasters
 Marketing downfalls
o Keurig cups are not available for
purchase in retail stores,
demonstration impossible
 Creates confusion for the buyer when
purchasing their cups
OPPORTUNITIES
 By avoiding disruption of the OCS group,
Keurig creates expanded distribution
channels for the at-home market
 Able to differentiate pricing based on OCS
or at-home product
THREATS
 Pricing is too high
o Competition is able to enter with
more attractive prices for the at-home
market
o Breakeven point is not met by brewer
sales, heavy reliance on Keurig Cup
sales
 Lose customers with disruption of “ease of
use” model

14. SWOT Analysis
K-Cup for Everyone
14
STRENGTHS
 Increases consumer satisfaction by
preventing inevitable confusion of cups
 Keeps the roasters happy
o Maintains single inventory process
o Increases demand and therefore
production of product
 Earlier entry into the at-home market,
before competition
WEAKNESSES
 Alienation of the Office Coffee Sector and
KADs
o Why buy something through a third
party, when it is available directly
from Keurig
o Create discontent with managers
 Decrease in pricing control through KADs
 Would require re-engineering of brewer
OPPORTUNITIES
 Lower costs and quicker entry of the at-
home market
o Avoid competition taking over
o Perfect the brewer production after
productive entry
THREATS
 OCS experience loss of money through the
theft of K Cups at work. No longer a
profitable product to maintain
 Brewer pricing
o Stays above average and allows entry
of lower priced competitor product
o Cannot market and sell through retail
channels at time of launch

15. Solution
Cup Approach
1 Cup approach
– K-Cups for everyone!
Appeases Green Mountain
and other partners
Eliminates the chance of
confusion
– Maintains “simplicity” of
model
15

16. Solution
“Pioneer” Launch Strategy
At Home Market
– Sell K Cups direct at $0.50
– Sell online
– Find a demonstration driven outlet to sell through
• Conferences, mass transit stations, airports, trade shows, shopping malls
Office Coffee Service Market
– Sell K Cups to KADs at previous rate
• $0.25 paid to roasters – $0.40 cost to OCS Managers
– KAD Referral Program
• $15 for each brewer sold, $0.02 for each cup sold for three years
Public Relations
– Marketing by roasters -- Retail stores, catalogues, and websites
– Be the “pioneer” of the industry
• Able to maintain a higher selling price
– Expand roaster partnerships
• Increase variety and marketing platform 16

17. 17
K-Canvas
Customer Segments
Offices/Food Services
Households
Cust. RelationshipsValue PropositionsKey ActivitiesKey Partners
Key Resources Channels
Revenue Streams
Royalties
BrewersCost Structure
Brewer Manufacturing/Assembly
Marketing and Demos
Coffee