Will Keurig's Bet On Cold Beverages Pay Off?
Waterbury-based Keurig Green Mountain hopes the holiday season will propel sales of its recently introduced cold beverage system.
It’s not the first such product on the market, but at a recent demonstration, the company touted its unique aspects.
Keurig Kold was introduced this fall after six years of development. It took just over one minute in the demonstration for the machine to make an 8-ounce carbonated beverage.
The makings for a cold system beverage are contained in a pod that’s somewhat larger than the company’s familiar K-cups.
Phil Drapeau, senior director of cold systems at Keurig, says it’s much easier to design a unit that quickly heats water than it is to make one that chills it just as quickly. While the cold system’s chiller was made from scratch, it’s based on existing technology.
The real innovation is in the way the beverages are carbonated.
“We had to first figure out how we would do CO2 carbonation in a single serve. The carbonator beads were a long-range invention that needed to be figured out,” says Drapeau.
Inside each carbonated beverage pod are beads made from a mineral.
“We actually use a mineral that we create synthetically that has small pores in it. The pores hold onto the CO2,” Drapeau explained. “The CO2 waits to be released into the chiller to mix with the beverage water. We prompt that release with a little bit of water.”
While the machines are made in China, the pods for Keurig Kold are currently manufactured in Williston.
"We had to first figure out how we would do CO2 carbonation in a single serve. The carbonator beads were a long-range invention that needed to be figured out." - Phil Drapeau, Keurig senior director of cold systems
In 2014, Keurig announced it was going to invest $337 million to build a new cold pod manufacturing facility in Georgia. At the moment, though, the Williston location is able to produce all the pods necessary to meet the demand.
“Our expectation is we will use [the Georgia facility] to ramp production of the pods once demand warrants it,” says Vice President of Corporate Communications Suzanne Dulong.
The cold system is being rolled out in stages. Currently it’s available in retail stores in six cities, and online.
Keurig has one major competitor for cold beverage makers.
SodaStream markets a system that carbonates beverages by using a CO2 tank that must be replaced periodically. Keurig Kold currently sells for about $340 at the online site Amazon. The pods generally cost about $1 each. SodaStream’s system sells for less than $100.
Keurig officials won’t comment on sales of the system, but Drapeau says the idea for a cold maker came about because consumers expressed an interest.
The system features more than two dozen choices of sodas and drink mixers, including carbonated beverages. A line of root beers and cream sodas was developed at the company’s Waterbury headquarters.
"You don't need a machine to get a cold beverage. That's what my refrigerator does for me." — Seth Golden, a research analyst with Capital Ladder Advisory Group
Seth Golden, a research analyst with Capital Ladder Advisory Group, has questioned Keurig’s rationale for the cold system from the start.
“You don’t need a machine to get a cold beverage. That’s what my refrigerator does for me,” says Golden.
He says consumers have been reluctant to embrace the less expensive SodaStream system.
He anticipates that in the near future other companies will cut into cold system sales by marketing more popular hybrid home systems that brew both hot and cold beverages.
Golden also believes Keurig could profit in the future from licensing the carbonation beads technology.
Last month, it was announced that Keurig is being sold to JAB, a European private equity firm. It’s not clear what that will mean for the future of the cold system that the company has invested so heavily in.