5-Force Analysis of Keurig Brewing System by Jay Haque

1537 Words Oct 9th, 2011 7 Pages
Abstract
Green Mountain Coffee Roaster’s Keurig Single Brew system is dominating the U.S. market with an overwhelming market share. Analysts expect sales of single-cup brewing systems to continue to grow in the U.S. and competitors are eyeing a piece of the pie. An analysis of Keurig’s current position, based on Michael E. Porters 5-Forces, highlights a number of key areas of opportunity and risk for the company. Handled correctly, the Keurig product line should continue its growth, however, a number of significant pitfalls threaten its dominance. Keywords: Green Mountain Coffee Roasters, Keurig

5-Force Analysis of the Keurig Single Brew Coffee System

Rivalry Consumers considering single-cup brew coffee units are looking for
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Power of Suppliers GMCR’s warns of the potential impact of the price of coffee on the gross profit margin. To combat this, GMCR had made a number of purchase commitments to ensure an adequate supply of coffee (GMCR Annual Report, 2010). The market price for coffee is impacted by numerous factors including weather, economy, and competition. It is vital that GMCR continue to take proactive measures to secure against unforeseen spikes in coffee prices. The price of coffee does not only impact GMCR’s ability produce coffee for the Keurig brewer under its namesake but impacts their partner suppliers as well. GMCR purchases coffee from brokers, farms, estates, and cooperative groups and essentially diversifies its coffee supply, reducing some supply risk (GMCR Annual Report, 2010). Suppliers such as Starbucks and Dunkin Donuts are marquee names in the coffee business. The brands are powerful and offer significant value to the Keurig product line. GMCR must continue to build similar relationships and retain them for the long term. These strong brand names not only offer a new target customer they also reaffirm Keurig positioning as premium product. The bargaining power of these suppliers will vary based on size and brand. GMCR must determine its power when negotiating future deals with such suppliers, in cases like Starbucks, GMCR should be willing to give more (accept lower royalty) to continue building the brand.
Power of Buyers Patents protecting the K-Cup