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Keurig Cutting 200 Vermont Jobs

Steve Zind
Keurig has announced it will cut 200 jobs in Vermont.

Waterbury-based Keurig Green Mountain says it will cut approximately 200 jobs in Vermont.

Keurig announced Wednesday that it would eliminate 330 jobs at its operations throughout North America. Late Thursday afternoon, it confirmed that the majority of the cuts would be made in Vermont.

The company says most of those jobs are in the production of the company’s hot beverage system at its Waterbury headquarters.

The company says the cuts are partially offset by 60 recently opened jobs in Keurig’s cold system production facility in Williston.

Keurig says it will try fill some of those jobs with affected workers whose skills fit the new positions. In all the company says it currently has 75 open production positions.

Keurig currently employs approximately 2,200 people in the state.

Keurig Vice President of Corporate Communications Suzanne DuLong would not say how much the job cuts will save the company, but they are part of a larger program designed to generate $300 million in savings in the next three years.

In response to the job cuts announcement the state has organized a job fair Sept. 10 at the Sheraton Burlington Hotel and Conference Center.

In a statement, Gov. Peter Shumlin said, “This is a huge hit to the affected employees and their families... Our focus now must be on those affected by these job cuts."

Keurig has qualified a number of times for incentives under the Vermont Employment Growth Incentive Program, also known as VEGI.

Most recently the company won approval for nearly $1 million dollars in VEGI cash payments, which are made over a period of years to assure a company fulfills the terms of the program.  

Fred Kenney, executive director of the Vermont Economic Progress Council, which oversees VEGI, says depending on the application, a number of criteria come into play when determining whether a company is meeting its commitments.

The primary condition is increasing company payroll, but boosting job numbers and capital investments can also be required.

“The Keurig authorization involves payroll, headcount and capital investment,” says Kenney.

Performance standards for a company can change from year to year and Kenney says whether Keurig meets its 2015 requirements will be reviewed in April, 2016.

“It could mean that they would not be eligible to earn the incentive that they were trying to earn for 2015, or if they had already earned the incentive from a previous year it could mean that they’re not able to maintain the payroll or employment levels to keep getting installments from a previously earned incentive,” he says.

Responding by email DuLong said, “At this time given our plans we think the risk that prior tax incentives could be impacted is remote.”

Keurig hopes cost cutting measures will help calm investor jitters over sluggish sales of the company’s hot beverage systems and a less than enthusiastic response from industry experts to the forthcoming roll-out of the new cold beverage technology.

In the wake of Wednesday’s announcements, Keurig shares had lost nearly 30 percent of their value by early Thursday morning.

Keurig CEO Brian Kelley made no bones about the  latest earnings picture in a webcast on Wednesday.

“I'll begin by stating that we are not satisfied with our financial results for the third quarter,” he told investment analysts.

One source of Keurig’s ongoing financial difficulties is tepid brewer sales during the 2014 holiday season. Brewer volumes were down 18% in the quarter.

Fewer brewers sold means less demand for K-Cups

“The brewer challenge is what the real issue is, and when you have a tough holiday season like we did and you don't sell more brewers than you did the prior year, you have the challenge,” Kelley said.

Kuerig introduced the 2.0 hot beverage system last year, which features a proprietary technology that limits consumers to Keurig-licensed K-Cups.  The price of the unit was higher than its predecessor.

The company has now introduced less expensive versions of the system.

“For holiday 2015 we will have a broader portfolio with a variety of brewer models across more price points,” Kelley said.

The company also hopes a wider selection of licensed K-Cups will ease consumer dissatisfaction.

Kelley said the company is also investigating improvements to brewing systems, including wi-fi enabled units.

Another factor affecting third quarter earnings is higher coffee costs.

The coming quarter will see the introduction of the new Keurig KOLD system.

Despite the job cuts and lower earnings, the company is sticking to a roll-out plan announced earlier in the year.

“There's 20 million plus Keurig households already out there, who know and love Keurig, and who know the benefit of Keurig and they want that applied to cold beverages. So, we're going to start slow, we're going to be disciplined, and we're very excited about the KOLD launch,” Kelley said.

The retail price of the KOLD system will start at about $300.  When details of the new system were announced, there was skepticism among many industry analysts about both the technology and the price.

The company is anticipating a fiscal 2016 profit and loss investment in Keurig KOLD of at least $100 million.

Last year, Keurig announced it is building a major manufacturing facility in Georgia to manufacture KOLD pods which would 550 people.

DuLong says there is a small team currently in place at the facility and it will scale up based on demand for the pods.

Keurig has partnered with Coca Cola for the new KOLD system, an agreement that has enabled the Georgia company to become Keurig’s largest shareholder.

Despite the cost-cutting measures, the company confirmed that it is acquiring a corporate jet, explaining that it is more cost-effective than contracting with outside companies for jet service.

Steve has been with VPR since 1994, first serving as host of VPR’s public affairs program and then as a reporter, based in Central Vermont. Many VPR listeners recognize Steve for his special reports from Iran, providing a glimpse of this country that is usually hidden from the rest of the world. Prior to working with VPR, Steve served as program director for WNCS for 17 years, and also worked as news director for WCVR in Randolph. A graduate of Northern Arizona University, Steve also worked for stations in Phoenix and Tucson before moving to Vermont in 1972. Steve has been honored multiple times with national and regional Edward R. Murrow Awards for his VPR reporting, including a 2011 win for best documentary for his report, Afghanistan's Other War.
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