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Keurig DRM Shows Green Mountain Misread Its Market

2 keurigs in curbside junk pileIt’s an epic story of a company misreading its core market, and it could cost the makers of Keurig dearly. Green Mountain Coffee Roasters recently announced that they’ll be adding DRM (Digital Rights Management) to their coffee machines in the near future, and they’re getting press for it in unlikely places. At Wired Magazine, Marcus Wohlsen discusses how Green Mountain and Keurig DRM might break the Internet, while Cory Doctorow talks about how Green Mountain’s DRM move may make new copyright law. Meanwhile, over at CNET, Ry Crist points out that the new Keurig 2.0 will have to compete with its own existing brewers, which will, of course, continue to brew coffee packaged by the competition. And over at Techdirt, Karl Bode pulls no punches in highlighting Green Mountain’s douchebaggery by dissecting Keurig’s response to criticism over the Keurig DRM, which was that the Keurig 2.0 needs to identify the inserted pack in order to “deliver new interactive-enabled benefits“. In an expanded statement, Keurig said:

…our new Keurig 2.0 system will feature specially designed interactive technology allowing the brewer to read information about the inserted Keurig pack. With this interactive capability, Keurig 2.0 brewers will “know” the optimal settings for the inserted Keurig pack, for a perfect beverage every time, whether a single cup or a carafe. It is critical for performance and safety reasons that our new system include this technology.

Anyone who follows coffee brewer tech knows that those capabilities are not exactly revolutionary. In fact,

The consensus on Green Mountain’s Keurig 2.0 move is that the company is engaging in a short-term greed-based move to lock its users into using their licensed packs only — and of course, that’s precisely the effect the DRM enabled machines will have. It’s a business model that has worked for Keurig and GMCR since its inception. The Keurig and the K-cup overtook the single-serve coffee market not because the company offered a better brewer that makes better coffee, but because Green Mountain offered the one thing that other single serve coffee companies couldn’t — an enormous variety of nationally known specialty coffees, packaged for their machines and only their machines. Their licenses with coffee roasters ensured that those coffees would be available as single serve only through Green Mountain Coffee Roasters and Keurig, and their aggressive defense of their patent ensured that no other company could bypass a licensing agreement with GMCR to package their own coffees. Essentially, if you bought a Keurig, you were stuck with buying coffee from Green Mountain Coffee Roasters..

Until the end of 2012, at least. That’s when the patent for the K-cup expired. Even before that, a number of manufacturers had started making refillable cups for the Keurig — and Keurig’s patent didn’t extend to that. As the patent expiration date drew near, coffee companies got ready to start production on their own coffee K-cups. One company even jumped the gun, introducing their own Keurig-compatible OneCup in 2011, more than a year before the patent was due to expire. Rogers Family Coffee successfully defended its design in court, and won the right to continue selling its OneCup coffees, and as the patent expired in September 2012, knock-off K-cups hit the market. Keurig owners can now buy coffee in K-cups from Folgers, Maxwell House and many others.

Keurig’s first attempt to extend its domination of the single serve market was its introduction of the Vue brewer, which used a different type of coffee capsule — also patented — and which could not use standard K-cups. The big selling point of the Vue was its ability for users to control the strength of the coffee by controlling the temperature and brew time. The Vue fell flat, in large part because Keurig misjudged its market. The coffee drinkers who care about such arcane things as brewing temperature and extracting the best flavors from coffee have already decided that single serve coffee makers do not deliver a quality cup of coffee. Those people don’t by Keurigs on principle. The people who buy Keurigs aren’t particularly interested in paying significantly more for a machine that gives them capabilities they don’t care about.

Keurig’s newest announcement, the so-called DRM coffee brewer, looks an awful lot like another market misjudgment on the company’s part. What they’re offering simply isn’t all that important to the people who buy single serve coffee makers. Worse, it’s a  huge PR mistake, positioning the company as one of the biggest douchebags in the coffee industry. the 2.0’s only saving grace is that, unlike the Vue, the new Keurig DRM cups will play in existing Keurigs.

We’ll be interested in seeing if Keurig manages to convince a significant portion of the market that it’s worth paying a hefty price for a machine that restricts its users to only using its own coffee capsules, or if most will see the move for what it is — a cynical attempt to circumvent the decisions of the free market and hold onto its market share with increasingly desperate tactics.

Photo Credit: swskeptic

Deb Powers has been reading about coffee, drinking coffee, brewing coffee, writing about coffee and roasting her own coffee for nearly 30 years.She confesses to being a coffee wonk and finds endless fascination in even the most meta of coffee information.
Deb Powers on Google+
Deb Powers (Chamie) at ROASTe.com

Deb Powers – who has written posts on CoffeeBreak.Today.


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