Over the past few years, Keurig’s single-serve coffee pods and machines have been popping up in homes and offices across the country. These relatively new products put a new spin on an old staple, and they’ve taken the ground coffee industry by storm since their introduction to the market. What’s behind this niche product’s skyrocketing popularity? In today’s post, we’ll take a look at how single-serve coffee makers and pods came to be, how the idea caught on, and what your business can learn from their success.
Keurig has become a household name in the last few years, but the popular coffee makers were actually developed over two decades ago by a pair of innovative college roommates named Peter Dragone and John Sylvan. Dragone and Sylvan started Keurig in 1992. The team came up with the concept to solve a common problem. Traditional coffee pots in office kitchens everywhere were left on for several hours at a time each day, resulting in burnt, unpalatable coffee that often went to waste.
Business was slow-going at first, but the tables turned in 1996 when Green Mountain Coffee invested in the company. Keurig developed their first machine, which was introduced to the market in 1998. The first iterations of the Keurig brewers hooked up to kitchen plumbing in offices, and they provided a convenient alternative to traditional drip coffee machines – and better coffee. Keurig’s sales team focused on selling their machines to distributors rather than directly to customers. Early iterations were placed in offices for free. While Keurig made very little money on the sale of their brewers, they brought in considerable revenue from K-cups. Each time a nascent version of the popular brewer broke, which happened fairly frequently in the beginning, customers would call the company with urgent requests for a new one. Demand grew considerably. Keurig brewers became a popular addition to approximately 40,000 office buildings around the country. In 2004, the company decided to tap into a new market, and designed a machine for in-home use.
The rest, as they say, is history. In the decade since the introduction of the in-home Keurig machine, single-serve pods have grown into a $3.1 billion dollar industry, commanding over one-third of the total ground coffee market share. The Keurig brand is one of the most widely known among coffee makers and an estimated 7.5 million brewers have been sold.
Why did it become so popular?
Keurig coffee makers are – in general – more expensive than traditional coffee makers. K-Cups pods are also generally more expensive than a pound of ground coffee. Given this, one might assume that the high cost might inhibit sales. So why did it catch on?
The single-serve coffee concept has become popular in this country for several reasons. First, the founders of Keurig took the time to research the market and test the concept. As mentioned, the product was initially conceived to solve a common problem that plagued offices everywhere: burnt coffee. The company’s mission was to provide its customers with a fresh and delicious cup of coffee with each single-serve pod. Before coming up with a functional prototype, entrepreneurs Sylvan and Dragone spent years experimenting with failed machines and K-cup pods and testing their unique concept with potential investors and companies. Rigorous testing was a big part of why Keurig became so popular.
Convenience was also a major factor that helped drive sales for the company. Not only did Keurig machines produce fresh cups of coffee, they did it in less than a minute. The process was much faster and easier than brewing a whole pot in a traditional drip machine, and coffee drinkers could simply grab a cup and go.
It’s also worth mentioning that Keurig made the right decision when they adapted their product for in-home use. Before developing the new brewer, they polled office workers who had used the machines in the workplace to see if there was interest in a home-based product. The answer they received was a resounding, “Yes.” The company went to work developing a smaller, less expensive version of their original machine for in-home use. Then they set up demonstrations at popular department stores to grab the attention of customers.
One of the most important takeaways from the Keurig success story is that many customers are willing to pay extra for quality and convenience. Single-serve machines and K-cups are expensive compared to traditional brewers and ground coffee. But the hassle-free, fast-brewing process and consistently delicious cups of coffee provide enough of a benefit to outweigh the cost. Rigorous testing also paid off in the case of Keurig. Company founders spent considerable time testing the concept to see if it would actually catch on with their target customers, then refined it with the development of prototypes and early brewers. The result is that the machines, which began as a niche product, caught on like wildfire in the mainstream market. For many consumers, Keurig machines and K-cups have become a morning must-have.