Green Mountain Coffee Roasters has announced a deal with Campbell Soup to start selling chicken soup K-cups for Keurig beverage machines.
K-Cups, for the uninitiated, are single-serving pods filled with beverage powder mix — usually hot chocolate, tea, or coffee. When you insert one in a Keurig machine and press the button, the machine punctures the foil lid and plastic bottom, and shoots hot water through the pod. What you get is an insta-brewed hot beverage, without the hassle of separating paper filters, boiling water, or steeping a tea bag.
They're nifty. But they've also been a challenge for Green Mountain's share price since 2011, when hedge fund manager David Einhorn publicly announced he was shorting the stock. In a 110-page presentation to other investors, Einhorn explained that with the patent on K-cups expiring and Starbucks gearing up to release its own instant coffee machine, the Verisimo, Green Mountain was about to face a crushing wave of competition. The stock price plummeted after his remarks, and though it's back up, it's nowhere near pre-Einhorn levels.
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Well, Einhorn had a point. Despite Green Mountain's licensing agreements with coffee giants like Dunkin' Donuts, the K-cup market is starting to get crowded. Now, the company is betting that consumers will want their Keurigs to do more than just brew coffee, which is where the packets of dehydrated chicken broth come in.
Some, like The Huffington Post's Carey Polis, think canned soup is already convenient enough:
Have a craving for canned soup? Fine. We'd like to introduce you to something called a stove, which can heat up your soup in just minutes. Or maybe you've heard of a microwave? Campbell's already has on-the-go products meant to be zapped. But, then those wouldn't be "fresh-brewed." They would just be heated. Like soup is supposed to be. [The Huffington Post]
But Green Mountain says customers have already reported using their Keurig machines to add hot water to soup mix. "We don't think we will have to convince consumers to think of their Keurig machines this way; they already are," Green Mountain CEO Brian Kelley told The Wall Street Journal.
Mr. Kelley said the soup is meant to be a low-calorie afternoon snack, which will be attractive to existing customers. The convenient soup cups could also appeal to college students—a substitute for the ramen noodles ubiquitous in college dorms. Green Mountain is becoming more accessible to younger consumers with its miniature Keurig machines; the prices of older models are coming down as new brewers go on the market. [The Wall Street Journal]
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