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GMCR 'hitting milestones' for 2015 Keurig Cold launch

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By Ben Bouckley+

13-Aug-2014
Last updated on 13-Aug-2014 at 17:11 GMT

Coke took a 10% in GMCR in May and is partnering the firm to develop a pod-based system for cold carbonated soft drinks (Photo: Ruben Alexander/Flickr)
Coke took a 10% in GMCR in May and is partnering the firm to develop a pod-based system for cold carbonated soft drinks (Photo: Ruben Alexander/Flickr)

Green Mountain Coffee Roasters CEO Brian Kelley insists the firm is on track for a fiscal 2015 launch of its cold carbonated soft drinks system and is working closely with shareholder Coca-Cola to perfect the latter's brands for use.

Kelley said work had begun on setting-up a Vermont-based production facility for the first pods, while Q2 saw his firm buy a 585,000 sq ft site for its first dedicated Keurig cold production facility in Lithia Springs, Georgia.

Green Mountain Coffee Roasters (GMCR) expects to invest $300m+ in this site over the next five years, he added, and create 500+ new jobs; details of the cold carbonated system remain patchy, but consumers won’t need to buy separate CO2 cartridges for the system.

'We're working closely with Coke'

Coke bought a 10% stake in GMCR for $1.25bn this February, and the new partners plan to make pods for use in the patented Keurig Cold system – a fiscal 2015 launch mean it could hit store shelves as early as October 2014.

“We are on track and working closely with The Coca-Cola Company to develop and perfect some of their brands for the system,” Kelley told analysts last Wednesday, as GMCR reported net sales up 6% to $1.02bn and operating income up 20% to £243m for Q3 of Fiscal 2014 ending June 28.

“We are also developing and perfecting a variety of our own new brands to be launched in our cold system and we are working with other potential co-partners,” he added.

Moving beyond the single-serve narrative

Keurig Green Mountain will ship its Keurig 2.0 hot system this fall, where this moves the company beyond the single-serve narrative – by allowing customers to prepare four-serving coffee carafes using K-carafe pods.

The company estimates that around 75% of the coffee consumption in American Keurig households comes from its Keurig 1.0 machine and the remaining 25% from another brewer, with the latter used for its higher volume and “many multiple serves”.

“So we do expect with the 2.0 – it’s certainly our expectation and it played in the use test at home, that we get a portion of that 25%,” Kelley said.

“We expect that 2.0 will appeal to non-Keurig users who are yet to purchase a brewer, because they want the option to brew larger volumes with Keurig’s simplicity,” he added.

UK launch marks first foray into international markets

“We are going to show that it does everything 1.0 does, with the same Keurig simplicity, plus you have a greater variety of size and brands,” Kelley said, noting that Keurig’s system offers pods from 50 brands.

With new licensed partners for including Nestle, Harris Teeter and BJ Wholesale Club, Kelley said he expected the share of owned/licensed branded pods in Keurig’s system to increase noticeably in fiscal 2014/15.

The launch of a Keurig hot system in the UK away-from-home channel earlier this year marked the company’s first foray into international markets, and Kelley sees significant opportunities abroad for the company’s hot and cold systems.

“We will be selective and disciplined in pursuing them and we do not expect meaningful contribution from international revenue in the short term,” he said.

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