Issue link: https://read.dmtmag.com/i/491368
STiR tea & coffee industry international 41 In an act of defiance both TreeHouse and Mother Parkers began producing non-licensed capsules they say will brew coffee in the new Keurig 2.0 machines. "We are seeking free and open competition to bring our cus- tomers high quality and innovative products at better prices," Reed wrote in a release announcing the lawsuit. "We've got a great history of introducing products that are compatible, national-brand equivalents that don't overstep legal lines," said Dennis F. Riordan, TreeHouse c.f.o. and executive vp. He told analysts the company has done an excellent job "of making sure we run clearly within the right legal framework to introduce these products. We did that with our original coffee products and we'll do that with this as well." Keurig said these suits, and several filed as class actions by customers, are "without merit" according to a company spokes- person. Keurig maintains the new technology simply offers greater control over variables such as brew time and temperature to make a better cup. Mid-sized roasters react Mat Lasater is one of many mid-sized roasters doing big busi- ness in single serve. Five-store Lasaters Coffee & Tea in Clarks- ville, Tenn., sells 350 cartons a month in-store and online, he said. "Our focus is primarily at our retail locations, that is where 90% of sales are generated," said Lasater. "I don't think the introduction of these [new Keurig] ma- chines will affect private-label roasters very much, at least not yet. People love the single-serve, one-cup convenience. They know exactly how much coffee they want in the morning and don't want to overspend, waste or invest in a new machine," he said. The new machine's larger brewing sizes may prove popular but "many of us just purchased our single-serve machines and don't have any intention of dropping another $150 for a larger coffee machine OR new style pods," said Lasater, adding "Cof- fee drinkers tend to find what they like and stick with it for an extended period of time. First generation single-serve brewers are going to be around for a long time, I believe." Unlike first generation brewers, Keurig's new model will not brew refillable "eco" capsules or first generation capsules. "I don't know how Keurig plans to tell consumers what to do with the lids (in their pantry) that are still in date code but won't work in the 2.0," said CoffeeIcon's Ferguson. "Do cus- tomers who buy the 2.0 and still have old-style K-cups at home just throw them away?" he asks. Customers may think the ma- chine is broken when it no longer brews their favorite selection. Madsen at ECS said "Keurig is creating a ton of confusion in the marketplace. Some of their own lids are not yet compliant." "This 2.0 will only benefit Keurig - not the end consumer," said Ferguson. "No one wants to be locked down to a specific brand of coffee just because they bought a machine that locks out the competition." Home brewers Keurig c.e.o. Brian P. Kelley estimates that 25% of the coffee served in a Keurig household is brewed on a multi-cup mach- nine. These vary from old-style percolators to aging Mr. Coffee drip brewers. "It is certainly our expectation that we get a portion of that 25%," said Kelley. In-home tests of the 2.0 shows its "strong capability" to bring new users into the Keurig system. This is crucial to expand, he said. "The 2.0 is really what they are look- ing for, a multi-serve carafe of coffee as well as a single-cup. All they have to do is push the button, because the machine does the rest." He said the company expects to no longer produce 1.0 brew- ers, with a possible exception of the mini, within a year of launch. Customers shopping for the new brewer this fall will find coffee pods of various sizes packed with the machines. Shop- pers will also encounter a growing selection of licensed partners including Peet's Coffee & Tea, Target, BJ's Warehouse Club, Harris Teeter and the entire line of Kraft coffees including Max- well House, Yuban and Gevalia. Evolving fill & packing equipment Roasters and retail clients eager to get into single-cup typically ship roasted beans or ground coffee to packers who place the coffee in the cup, label it with their brand, put it in nested cus- tom printed cartons or bulk boxes, and ship it back to them to distribute. Until recently only large national brands like Folgers, Star- bucks, and Dunkin Donuts could afford to purchase or operate equipment to make K-Cups. This multi-million dollar equip- ment was designed to fill a limited number of SKUs in produc- tion runs from 300,000 to more than a million capsules at a time. "With patent barriers gone, well positioned mid-sized roast- ers will add new dynamic to the single-serve cup business until major internationals develop new brewing systems better suited for multi-beverage format," predicts Marius Olszewski, vp of sales at Rychiger US. A new generation of smaller equipment like the Swiss made FS200 from Rychiger efficiently delivers 6,600 capsules per hour making it economical to fill and seal and box several SKUs 30,000 capsules at a time. "We initially purchased equipment that packs at a low to medium speed. This will allow us to run smaller production runs (50,000 cups per SKU) at an economical price," said POD Pack's Martin. "After our initial launch and when we better understand the needs of our customers, we plan to add additional packing lines with speeds that match our customer order sizes," he said. Rychiger FS200 fills 90 capsules per minute or 5,400 per hour.