Green Mountain Coffee Roasters Case Study Samples

Green Mountain Coffee Roasters and Keurig Coffee

http://www.keuriggreenmountain.com/

Processed and Packaged Goods (Coffee)

BACKGROUND AND HISTORY
Green Mountain Coffee Roasters has been a leading figure in the coffee making industry for quite some time. The company’s coffee products are widely renowned. The company is also well known for its creative brewing technologies as well as feasible business strategies that have made it stand out. The history of the company goes back to the year 1981 when a young man from Vermont, Bob Stiller started a small café that would later on grow enormously to become the huge brand that it currently is. The company has faced intensive competition over the years, but it has always found ways to stay at the top. This has been through various strategies. One of these for example took place in 2006 when the company formally acquired Keurig, which is an advanced single-cup brewing system for teas, hot chocolate and coffee (Keurig Green Mountain, Inc., 2014). This was indeed a genius strategy as the Keurig technology led to the diversification of Green Mountain’s product line and also boosted its distribution. The company has indeed continued partnering with other beverage brands, and this has enabled it to stay at the top of its game. Keurig has particularly opened many doors for the company as it is currently responsible for patenting single cup creations (commonly referred to as K-Cup). It also patents several coffee packages, for example, those produced by coffee making giants such as Starbucks and Dunking Donuts. The current C.E.O of the company is Brian Kelly (Keurig Green Mountain, Inc., 2014). The company gross profit as December 2014 was $ 464, 122 million while its net profit accumulated to $162, 084 million (GMCR Income Statement | Keurig Green Mountain, Inc. Stock - Yahoo! Finance, 2014).

SWOT ANALYSIS

Strengths
Financial stability/ healthy revenue growth
Great brand awareness
Presence of partnerships and collaborations with well-recognized brands
Numerous and effective distributions channels
Product quality consistency and product differentiation
Consistent and effective business strategies
Social responsibility
Weakness
Structural design problems
Seasonal business tendencies (business is higher in winter and in cold weather)
Several litigation charges that tarnish the company’s image
Too much dependency on one supplier (K-cup packs from Keurig).
Weak online presence
Opportunities
Expansion into new markets
Adoption of e-commerce that offers great potential for revenue growth
Business partnerships with new suppliers apart from Keurig
Threats
Impending expiration of parents
Changing weather and climate patterns that could affect coffee growth and production
Changing consumer trend and states (emergence of newer and substitute beverages)
High competition
PORTER’S FIVE FORCES MODEL
Threat of New Entrants
The threat of new entrants for the company is medium. The company already has a strong brand image as well a loyal customer base. However, there are likely to be new entrants into the market especially after the expiry of the K-Cup patent. However, the capital-intensive nature of the industry may discourage new entrants.

Threat of Substitutes

The threat of substitutes for the company is medium. The United States, which is the major market of the company, has one of the highest beverage consumption rates in the world. These beverages include soda and energy drinks. However, the most common beverage is coffee, and a majority of people admit to drinking at least one cup of coffee per day.

Rivalry among Competitors

There is a relatively high rate of competitive rivalry as the industry has several direct as wells indirect competitors. Some of these competitors that offer great rivalry include Millstone, Gevalia, and Seattle Best among others. There is also enormous rivalry and competition from small and regional brands.

Buyers’ Bargaining Power

The buyer’s bargaining power is medium. First, there is a great dependency by buyers on coffee shop chains. However, budget constraints could have a negative effect on brand loyalty. This is especially after the expiry of the K-Cup Patent where buyers could have greater bargaining power.

Supplier’s Bargaining Power

The bargaining power of suppliers is high. The first reason for this is because of the volatile nature of the raw material. In addition, the company is greatly reliant on specialty coffee farms which, therefore, have huge bargaining power.

STRATEGY USED

The strategy adopted by this company in order to create and also sustain a competitive strategy appears to be price differentiation. The company has reasonably priced its Keurig machines but has raised the cost for the K-cups that work with Keurig machines. However, the company has made consumers aware that K-cups offer a greater value that, to get from other cups, consumers would have to spend almost five times as much. The purpose for this is to create consumer awareness about the brewing machine in order to ensure that they continue buying the unlimited and higher value K-Cups that are sold exclusively by GMCR. This has led to an increased customer base made up of customers who insist on the Keurig K-Cups. According to Porter’s generic strategies, the company, is using the differentiation strategy where it has concentrated on a narrow market and provided it with high-quality products. This strategy could also work with other companies who could also concentrate on smaller niche markets.

ISSUES AND CHALLENGES

There are several issues facing the company that includes shifts in coffee consumption where the number of coffee drinkers is declining. The K-Cup patent expiry is another challenge. The company’s over reliance on specialty farms is also a challenge since it has given the suppliers huge bargaining power and in addition, if these specialty farms were to collapse, the company might also collapse. In light of these challenges, the company competitive advantage might prove hard to sustain. The company is currently in the decline stage of the product lifecycle.
There are several actions that this company might take and that might prove to be beneficial in the long run. The first is to initiate vertical integration steps with manufacturing companies. This will help in controlling the fluctuations witnessed in commodity prices. In addition, the company needs to invest in new innovation strategies in order to come with new products. In addition, the company has to increase its supplier base and cease its over reliance on specialty farms.

OPINION

Exploring this case study has helped me to realize how strategy development is important in any business. It has helped me realize how a company can address the problems it faces and how it can cope or deal with prevailing environmental conditions. In addition, I have realized that partnering with fellow businesses can lead to great mutual benefits for the partners, and it is indeed one of the greatest business strategies that can help a company maintain a competitive advantage.

References

GMCR Income Statement | Keurig Green Mountain, Inc. Stock - Yahoo! Finance. (2014). Retrieved February 16, 2015, from http://finance.yahoo.com/q/is?s=GMCR
Home | Keurig Green Mountain, Inc. (2014). Retrieved February 16, 2015, from http://www.keuriggreenmountain.com/
Dess, G., Lumpkin, G. & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.