Keurig Green Mountain's best product may also be its most ridiculed.
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Of course, 2015 was a tough year for the company's entire product line. The 2.0 brewer was attacked by users who felt its digital rights management software that prevents the use of unlicensed K-Cups was unfair. The company was also a target of environmental groups, including the name-says-it-all Kill the K-Cup, which took umbrage at the amount of waste the non-recyclable coffee pods create.
But, it could be argued that the most enmity was heaped at Keurig KOLD. Launched in partnership withCoca-Cola, KOLD was created to deliver a single-serve experience for soft drinks and other iced beverages that matches the one offered for hot drinks by the company's namesake brewers.
Keurig KOLD. Image source: Keurig.
And, while the company has not released any numbers, the launch of the KOLD has not gone well. That is not because Keurig and Coke have not delivered an impressive product; it's almost entirely because the machine had a release price of $369.99. It was sold for less than that during the Black Friday shopping period, but even a price tag of $199.99 is a bit shocking, and that has taken away from what is the company's best product not just of 2015, but since it launched the original K-Cup machines.
How does Coke fit in?Keurig, which is in the process of being acquired and brought private by JAB Holdings, made a historic deal with Coca-Cola to create a machine to bring the company's iconic sodas to a single-serve brewing machine.
As part of that arrangement, Coke took a 10% stake in the company originally, which it later upped to 17%. That stake will be acquired by JAB, but Coca-Cola and Keurig will continue their long-term contractual partnership centered on KOLD.
What is Keurig Kold?While it may be too expensive to become a mass-market product, KOLD is a pretty impressive machine. Whereas previous single-serve or at-home cold beverage systems used a separate CO2 cartridge, the Keurig machine puts both the drink ingredients and the CO2 (which gives it carbonation) in its proprietary pods.
"The disruptive countertop-size innovation in KOLD is like nothing consumers have ever experienced," said CEO Brian Kelley in the launch press release:
That sounds like typical new product hype, but KOLD is actually pretty fun to use. People may never buy it for their homes, but that does not change how impressive the technology behind the machine is, or how genuinely neat it feels to create Coke, Sprite, or another drink with a single button push on your kitchen counter.
Will it sell?While the initial reaction by consumers to KOLD has been chilly to say the least, Keurig did not expect it to fly off the shelves. The company has done a very limited rollout, with the single-serve cold brewer being sold online at its website and very selectively.
Whether it eventually finds a niche likely depends upon whether the company drops the price. It's also worth noting that the product it replaces -- mostly soda -- can be had for well less than $1 a can when purchased in small bulk, and often a similar price at a convenience store fountain.
That means the company does not have the same price advantage it enjoyed when it positioned its hot brewers as an alternative to the $3-$5 cups of coffee sold at coffee house chains. Still, just because KOLD may never be a commercial hit does not lessen the achievement of creating it. That was probably little solace for shareholders, but with the JAB buyout taking place at a nearly 80% premium over the stock price when the deal was announced, even they can celebrate the probably going-to-fail machine.
The article Keurig Green Mountain, Inc.'s Best Product in 2015 originally appeared on Fool.com.
Daniel Kline has no position in any stocks mentioned. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola, short January 2016 $43 calls on Coca-Cola, and short January 2016 $37 puts on Coca-Cola. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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