Photizo Insights Blog - Photizo Group
A colleague recently forwarded a TechDirt article about locking out the refill market…in coffee makers. Keurig is one of several companies that has greatly benefitted from the single coffee cup craze, and in order to protects its dominant market share, Keurig has apparently been “striking exclusionary agreements with suppliers and distributors to lock competing products out of the market,” according to the article. Third-party pod refills often retail for 5-25 percent less than what Keurig charges, and as people look to cut costs, there has been a growing market for generic pods that generally cost between five and fifteen dollars.
TreeHouse Foods, the company that filed a lawsuit to stop what it claims is anticompetitive actions by Keurig maker Green Mountain Coffee Roasters, adds that the firm is now developing a new version of its popular coffee maker that will incorporate lock out technology so that only Keurig’s own coffee pods can be used in it. The plan was confirmed by Keurig’s CEO, who stated on a recent earnings call that the new “Keurig 2.0” coffee maker, which is expected to launch this fall, won’t work with “unlicensed” pods as part of an effort to deliver “game-changing performance.”
After the obligatory remarks about drill and fill and managed coffee services (you just can’t keep a good analyst team from commenting on market events), I started thinking about comparisons to our industry.
- Razor and blades business model: Like printer manufacturers, coffee makers can sell the hardware cheaply and make a big profit on selling replacement refill pods.
- Patented designs: In this case, Green Mountain’s patent on the K-Cup design expired in 2012, enabling other companies to start making generic pods. Legitimate ink and toner remanufacturers design and produce third-party ink and toner cartridges that do not infringe on OEMs’ patents.
- Customer driven: Green Mountain says that to ensure the system delivers on the promise of excellent quality beverages, every brew every time, the firm will use interactive technology to help perfectly brew all Keurig brew packs. This statement sounds a lot like what printer companies say when talking about the use of genuine OEM ink and toner cartridges and their efforts to restrict the use of or lessen the appeal of non-genuine supplies—can anyone say “smart chip?”
As a consumer of toner and coffee (made in my Keurig coffee maker), my loyalty lies with a company that can deliver the best quality and the best price, i.e. value. With my background in the imaging industry, I certainly understand the science (and investment) that goes into the perfect matching of an imaging system to its ink or toner, and I expect that a fair amount of science and money is also involved in developing a system that brews the perfect cup of coffee. What I don’t like is when a company tells me what it thinks is best for me and takes away my ability to choose. If your coffee pod (or ink/toner cartridge) is truly better, that will become obvious when I try a third-party or generic substitute.
Interestingly, the TechDirt article was posted “from the who-wanted-paying-customers-anyway dept,” and concludes with the observation, “French Press and pour-over manufacturers like Chemex have plenty of time to get their thank you notes to Keurig in the mail ahead of time,” as the author believes that Green Mountain’s high-handed approach will alienate Keurig customers.
I have to wonder, though, if anyone outside of the single-serve coffee machine industry will even know about this lawsuit, much less think about the ramifications. I have to say that my friends and family would be very surprised to hear about all of the legal maneuvering that goes on in the imaging supplies aftermarket. So, without my colleague bringing this article to my attention, this whole brouhaha (OK, I had to get one pun in here) would have passed by unnoticed by me.
The courts will decide what is anti-competitive behavior and rule accordingly. As a consumer, I will continue to buy based on value, and that means evaluating the options that are out there and making an informed buying decision. Companies that can truly deliver the ultimate customer experience will win my business…and my loyalty.Read More Retweet
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