Premium price for Keurig Kold a ‘big obstacle’, say market reseachers

By Elaine Watson

- Last updated on GMT

Price for Keurig Kold a ‘big obstacle’, Datamonitor, Euromonitor

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While shares in Keurig Green Mountain fell sharply after bosses unveiled the $299-$369 price tag for the new Keurig Kold machine (99c-$1.29 per pod), CEO Brian Kelley said purchase intent scores were high as consumers understood the value proposition.

In a presentation to analysts and investors about the at-home cold carbonation system, Kelley said Keurig Kold tapped into the trend towards customization, would appeal to urban dwellers that don’t like lugging heavy soft drinks home from the store, and promised choice, freshness, portion control (8oz, 100 cals or fewer).

It also frees up space in the fridge and promises “all the fizz without the fuss", ​he said, ​as there is no C02​ canister [Kold uses ‘carbonator beads’ instead].

The machines – which produce cold beverages at 39°F in 60-seconds - will be sold online from the fall of 2015 and will roll out to retailers through 2016, with six new brands exclusive to the Keurig system [Red Barn, Flynn’s, waterful, Flyte, Tierney’s, Seraphine] plus products from Coca-Cola and Dr Pepper Snapple Group.

Asked about sales forecasts, Kelley expects a slow start (“100s of thousands in the first year rather than millions”)​, but a rapid scale up later:  “Our mission is to have an appliance on every counter and a beverage for every occasion…

“We expect personalization, freshness and simplicity to drive an evolution in the way cold beverages are consumed…. We’re democratizing the choice of beverages in the home … ​[which] will become an exciting beverage experience center.”

Keurig Kold strip

Euromonitor International: High price is a big obstacle

But does Kold promise a sufficiently distinctive experience to warrant shelling out 99c-$1.29 per serving for DIY beverages that aren’t hugely different from anything already available in ready to drink formats, where the unit price is considerably lower?   

Howard Telford, senior beverage industry analyst at Euromonitor International, told FoodNavigator-USA price was a “big obstacle”.

Keurig Kold poster

But he added: “One thing that encourages me is the slow roll out. The online-only strategy for 2015 seems smart to me, to gauge interest at first with a view to a bigger push next year; we’ve seen this ‘start small’ approach with the new brand launches from Coca-Cola and Pepsi this year.

“Given the obstacles to adoption in terms of price and headwinds the carbonated soft drinks sector is facing in general, there needs to be some time to build interest and buzz in terms of strong marketing and support.”

Keuri Kold pods

Datamonitor Consumer: ‘The initial purchase price is going to be a strong barrier.’

Tom Vierhile, innovation insights director at Datamonitor Consumer, added: “The potentially game-changing innovation here is being able to do this without any carbon dioxide canister.  That looks like a major advance over SodaStream as does the ability to dispense soft drinks cold right from the machine.”

As for customization, he said: “I thought this would be more Coke Freestyle-like, where you could mix and match flavors and make your own drink that way.  I’m not sure if the Kold machine can accommodate multiple pods at the same time (kind of like a CD player could accommodate multiple CDs) to attempt to do that.  Something like that could help justify the price.  If not, I don’t think there is enough there to justify the expense.”

Swash​ – a DIY dry cleaner from P&G and Whirlpool (SRP $500) and “another potentially game-changing appliance that really hasn’t gained traction yet​” – had suffered in part due to the high price point, said Vierhile.

“Keurig Kold and The Swash seem to have similar pricing issues; consumers are going to run some numbers in their heads to see if they make sense, and the initial purchase price is going to be a strong barrier.  I can see a consumer spending maybe spending $100 on a Keurig Kold unit to make it a quasi-impulse purchase, but $300+ a machine means it is going to be a planned purchase.

Keurig Cold solves problems
Keurig Kold general manager Tara Murphy said Kold “solves a number of problems hidden in plain sight from the consumer”.

“It may gain some traction during the holidays as a gift item, but it’s hard to see this being a volume item at that price."

We’re very confident in the pricing… consumers see this as very different than a coffee machine, it’s a new piece of technology

However, Kelley predicted Kold would grow to be larger than the hot business globally, adding:  “In home beverage systems will also change the way that consumers interact with brands as consumers will actually create brands.”

Quizzed by analysts about the price (which is significantly higher than SodaStream and some other brands – which retail at $79.99 to $199), ​he said: “We’re very confident in the pricing… consumers see this very different than a coffee machine, it’s a new piece of technology.”

Purchase intent scores, meanwhile, are “as high or higher than the hot system at these price points”, ​he added.

Asked who the target consumer was, he said early adopters were likely to include “large families with heavy consumption of cold beverages”.

See the slides from Keurig’s presentation HERE​. 

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