A price war could be developing in the K-Cup market, according to retail analyst Howard Penney....

A price war could be developing in the K-Cup market, according to retail analyst Howard Penney. The buzz is that Kroger (KR) is selling its store brand product at $6, an entry point that could pressure Green Mountain Coffee Roasters (GMCR), Supervalu (SVU), and Safeway (SWY) to trim prices on their single serve offerings.

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Comments (9)
  • GDW1
    , contributor
    Comments (74) | Send Message
    I don't think many of these guys get it. If the coffee s*cks, it doesn't matter how cheap it is. Folks won't buy it. People are pretty particular about their coffee. Does store brand put Coke/Pepsi out of business? does generic "anything" put brands out of business? Squeeze profits, yes. But coffee is different. Different tastes. Just like beer, wine etc.
    24 Sep 2012, 10:26 AM Reply Like
  • Yukon John
    , contributor
    Comments (7) | Send Message
    I agree completely. GMCR's bigger concern should be from SBUX. While there are some that will drink any swill, it's the quality that most people want.
    24 Sep 2012, 10:42 AM Reply Like
  • EricInPDX
    , contributor
    Comments (213) | Send Message
    You guys that are long GMCR and who are coffee connoisseurs continue to think, unwittingly, that 90% of the people who buy a Keurig machine do so because they want a quality cup of coffee at whatever cost.


    I can tell you (as a consultant), that I have seen Keurig machines at various locations, and hardly the majority of consumers seem to have to have the GMCR brand for their Keurig machines anymore.


    I have noted at my local Costco, that off brand K-cups sell for 31 cents each versus 64 cents each of GMCR's brand. That was three weeks ago. My guess is in a month, that off brand may be 25 cents each. I believe less than half of Keurig users absolutely care that they need the GMCR brand (probably much less), and honestly I have tasted differing off brands and the quality was not bad at all. I can not speak for Krogers brand as I have not tried it yet. There are people out there that drink instant coffee for heavens sake .... do you think if an instant coffee drinker got a Keurig machine for Christmas that they would need to buy GMCR K-s and nothing else? Do you not think it is feasible that an off brand might actually produce a high quality K-cup that was half price of GMCR's brand?


    Keep trying to convince yourself that GMCR will not be affected by all the clones coming out, and I will be more than happy to buy back your shares at $7.50 (or less) to cover my short :)


    There really is not as much barrier to entry in this particular game as you think and more clones are coming out of the woodwork everyday which will take market share along with pricing structure away from GMCR.


    These conversations remind me of the Snapple, Krispy Kreme and, more recently, Crocs conversations, especially with the continued buy recommendations that came out after the stocks tanked.
    24 Sep 2012, 05:59 PM Reply Like
  • GDW1
    , contributor
    Comments (74) | Send Message
    I don't own the stock, just the machine. As for "off-brand" coffee, no longer go there. For the extra cost, I end up getting coffee that has taste and just doesn't look and taste like brown water. There is a big difference.
    27 Sep 2012, 08:55 AM Reply Like
  • Bill Burtchaell
    , contributor
    Comments (413) | Send Message
    The "Buzz" is really a great source of more GMCR BS! I keep asking who write this drivel? No one admits to it.


    What does $6.00 mean? each or for a box or 100 K-cups?


    I own and operate a Kuerig brewer, I do it because I love the coffee, I have 200 choices, It's available all over and I know the quality. At what price would I change to an unknown, store brand, would .002-.005 cents a k-cup change my mind, would I be happy to give up 200 choices for a Kroger K-cup.


    I purchased the k-cup capsule that allows me to load my own coffee and to brew with my kuerig brewer. I used it maybe 10 times, regardless of what coffee I used it didn't compare to GMCR K-cups. It not about cost fellows it's about taste, quality, consistency and 2 cents more will not break me, I'm drinking coffee for fifty cents at home that people are standing in line to pay $3.00 for, give me a break!
    24 Sep 2012, 11:32 AM Reply Like
  • EricInPDX
    , contributor
    Comments (213) | Send Message
    Bill I believe it is $6.00 for a 24 count, or 25 cents each.


    To refute you statement "At what price would I change to an unknown, store brand, would .002-.005 cents a k-cup change my mind, would I be happy to give up 200 choices for a Kroger K-cup.".


    If you read my post above, using the Costco cost per K-cup and the GMCR 80 count coffee cost (cheapest offering by GMCR), it is 64 cents each. That is a 33 cent difference, or over $26 per box using an 80 count. I'm sure many offices, or home coffee drinkers who drink four cups of coffee a day would prefer to save $26 every two weeks or so on coffee if the quality were similar. Some connoisseurs will continue to buy GMCR brand, no matter what the price, but many will gravitate to the cheaper costing brands. It doesn't take much percentage of users to gravitate to the clones to hurt GMCR. It doesn't help GMCR that Kroger is now at 25 cent per price point - almost one third the cost..


    Enjoy your cup of jo.
    24 Sep 2012, 11:10 PM Reply Like
  • williasp
    , contributor
    Comments (321) | Send Message
    Do you seriously think people are calculating the cost of coffee per cup? If so, then SBUX should be out of business. In fact, by that analysis MCD should be vastly outselling SBUX and threatening to put SBUX out of business. Better yet, no one should be selling coffee in drive through windows because it is just way too expensive. Plus you have to drive there and wait in line - how inconvenient.
    Clearly there is much more to a coffee purchase than just the price per cup. Brand loyalty is a big factor. Taste and selection are big factors. Convenience is a big factor.
    Store brand cola is no threat to Coke and Pepsi. The same applies to coffee.
    26 Sep 2012, 09:59 AM Reply Like
  • G-Hammer
    , contributor
    Comments (346) | Send Message
    All it takes is a trip to Costco's website and you will see green Mountain K-cups in bulk for 47 cents a cup.
    28 Sep 2012, 02:53 AM Reply Like
  • EricInPDX
    , contributor
    Comments (213) | Send Message
    I see $84.99 for 160 count which is 53 cents each, at Costco but as suggested GMCR's margins are already being pressured by clones.


    Recently in Costco instore, clones were 31 cents each. Kroger already selling for less than that.


    All their eggs inthe basket are on success of the Vue. They don't make any $ on the brewers, only on the coffee they sell. How long until a Vue clone comes out? And since clones on the K-cup come out of the woodwork long before the patents expired, Vue clones (if the hardware is successful), will be out long before those patents - there are probably simple modifications that can be done to get around them? Maybe, maybe not ... but more chance GMCR will see $7 than $47.
    3 Oct 2012, 12:57 PM Reply Like
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