Wednesday, December 4, 2013

Green Mountain Coffee: Roasted by Competition[1]
Green Mountain Coffee Roasters, Inc took advantage of blue ocean strategy by expanding the coffee market with the introduction of the Keurig. However, recently Green Mountain Coffee has experienced plummeting stock prices and a less than idea market position. This is due, at least in part, to a poor corporate strategy and flawed demand forecasts.

Many individuals thought that the Keurig would remain on top for several years. Green Mountain still has the brewer patented and makes high profit margins on each K-cup. Furthermore, there are few competitors in the space. These factors led Green Mountain executives to think that they had cornered the K-cup segment of the coffee market. At the time of Keurig’s invention there were no competitors in the space and a high demand for on-the-spot coffee. However, recent projections of demand have been significantly higher than actual demand which has led to financial woes. One analyst notes that he has recently seen expired K-cups on Amazon, a sign that inventory is unsustainably high. To add insult to injury, Green Mountain will soon lose its patent protection of K-cups.[2] This means that the blue ocean that Green Mountain dominated a few years ago will quickly turn red.  Furthermore, Starbucks has just announced a new product, the Verismo, which will introduce direct competition.

Green Mountain Roasters has yet to fail. However, they are well on their way if they continue down their most recent trajectory. Will they take heed of the advice provided in Why Good Companies Fail to Thrive in Fast-Moving Industries, before it is too late? What can Keurig change with regards to its corporate strategy to ensure that they remain on top of the K-cup industry?

[2] Ibid.

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