Download - Keurig Presentation_LI
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Managing a New Product Launch
Roy CamposRobert Forrester
Alysse Tulanowski
At Home
Case Study byEric T.
Anderson
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Market Analysis:
Sales Trends • Takeaways:
• Sales of mass-market coffees flat or declining
• Sales of gourmet coffee increasing (40% over 5 years)
1996 1997 1998 1999 2000$0
$1,000
$2,000
$3,000
$4,000
$5,000
At-Home Coffee Sales
Mass Market Coffee Sales
Gourmet Coffee Sales
Year
Sale
s (m
illio
ns)
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Market Analysis: Quantity TrendsTakeaways:
Quantities of mass market coffee flat Quantities of gourmet coffee increasing (25% over 5 years)
1996 1997 1998 1999 20000
100
200
300
400
500
600
700
800
900
At-Home Coffee Quantities
Mass Market CoffeeGourmet Coffee
Year
Poun
ds (m
illio
ns)
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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 pressureSales 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
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Competition Analysis Data
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-$70likely
$0.25-$0.40 New system
Nestle Nespresso espresso capsules unknown unknown
Established as espresso in Europe,
may migrate to American-style
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Competition Analysis ConclusionsAll 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
Market Forces
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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
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Market Forces ConclusionsSuppliers revenue will provide a revenue stream for us, must make profitableWe 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 reachBeing “first to the market” will give us a (needed) advantage against substitutes from large competitors
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Marketing PlanMarket 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…
Brewer PricingForecasts
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Selling PointForecasted 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 $1,943,500.00Sold 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
$3,763,900.00 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 $1.24Weekdays 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
$1,666,350.00 $1,309,275.00
2003 Forecasted Profit -$701,700.00 $1,188,250.00 $1,342,775.00
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SolutionBrewer 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
Keurig B100 Brewer
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SolutionCup 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
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
0.0% 20.0% 40.0% 60.0% 80.0%
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%
K-Cup Pricing Based on Coffee Consumption
2+ Cup/ Day %
1 Cup/ Day %
Percentage of Interested Consumers*
Cup
Pric
ing
(Dol
lars
)
*Numbers based on customers who were very or somewhat likely to purchase the system
SWOT AnalysisCreation 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
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SWOT AnalysisK-Cup for Everyone
STRENGTHS Increases consumer satisfaction by
preventing inevitable confusion of cups Keeps the roasters happy
o Maintains single inventory processo Increases demand and therefore
production of product Earlier entry into the at-home market,
before competition
WEAKNESSES Alienation of the Office Coffee Sector and
KADso 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 marketo Avoid competition taking overo 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 pricingo Stays above average and allows entry
of lower priced competitor producto Cannot market and sell through retail
channels at time of launch
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SolutionCup Approach
1 Cup approach– K-Cups for everyone!
Appeases Green Mountain and other partnersEliminates the chance of confusion – Maintains “simplicity” of
model
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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
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K-CanvasCustomer Segments
Offices/Food Services
Households
Cust. RelationshipsValue PropositionsKey ActivitiesKey Partners
Key Resources Channels
Revenue Streams
Royalties
Brewers
Keurig Authorized
DistributorsBrand
Keurig = Excellence = Excellent Coffee
Ease of Use
No Mess!
Distributors
Licensing
Retail Chains
Cost Structure
Brewer Manufacturing/AssemblyMarketing and Demos
Keurig Authorized
Distributors
Fresh Cup
Every Time
Customer Service
Easy for Office Managers
Your Home is
now a Coffee
Shop
Online Sales
Coffee
Customer Service
Relationship
Management
Brewer Manufacturers