Keurig to drop coffee DRM after boss admits 'we were wrong'
And we're dropping your share price 10%, say markets
Coffee machine maker Keurig's attempt to lock customers into its proprietary K-Cup coffee pods was a failure, the firm's CEO has admitted, and the company is dropping the practice.
"Quite honestly, we were wrong," boss Brian Kelley told analysts after Keurig's latest quarterly results were released, the Washington Post reports. "We underestimated the passion the consumer had for this. We missed it. We shouldn't have taken it away. We're bringing it back."
In the second quarter of its financial 2015, Keurig saw sales of its coffee makers – which use convenient yet environmentally irresponsible (according to its creator) plastic pods to brew a higher-tech cupppa joe – fall 23 per cent after the firm introduced digital rights management (DRM) controls to ensure that customers could only use its own coffee pods.
Selling coffee in pods is a highly profitable business. Keurig's blends cost around $50 per pound when sold in K-Cups, which is well below the $380 per pound for Kopi Luwak coffee that's been crapped out by Asian civet cats but is easily double the cost of a typical supply of java.
Keurig used to allow customers to use other coffees in their brewers via a refillable pod called My K-Cup, but it dropped the product after introducing its new, DRM-enabled models. Kelley said the fall in Keurig's sales was largely down to rejection of these DRM-equipped "version 2.0" machines and that My K-Cup would return.
"My K-Cup was a terrific addition for the consumer," he said. "It wasn't used a lot, but for the consumer it was a nice element to have if they were given coffee as a gift. We took it away because My K-Cup wasn't going to work with our new system."
The stock market responded badly to the news, wiping 10 per cent off Keurig's share price after Kelley's admission and word that the firm is lowering its forecasts in light of "this complex product transition." It seems Keurig expects to be sitting on a lot of unsold stock after discovering that DRM simply won't sell to some people. ®