Strategic management

1. Keurig case
Group 10:
Le Hoang Kim Duyen-2959
Class 1 - Group 10 – Case 34
Le Hoang Kim Duyen – 295895
Tran Nhat Ha – 295921
Nguyen Hoang Hung – 295907

2.  Industry Overview
 Company History
 Mission Statement and Vision
 Products
 Brands and the patented technology
 Maps of where the company does business
 Operational Structure
 Financial Statement
 SWOT Analysis

3.  Where is the Keurig product in the life cycle?
 How To Expand
 Financial Conditions
 Marketing Advertisement
 E-commerce
 Analyzing The Presence Market
 The Competition -The Competitive Advantages
 Internal Factor Matrix
 External Factor Matrix
 Competitive Profile Matrix
 SPACE Matrix
 GRAND Matrix
 Quantitative Strategic Planning Matrix
 The Problems-Market Development
 The Timetable

4. The single cup coffee industry has grown in recent years:
• 2010 sales: 14 million dollars
• 2012 sales: 63 million dollars
 45% growth
Conversely, bagged coffee has sagged
• 2010 sales: 274.8 million dollars
• 2012 sales: 297 million dollars
 8% growth
Industry Overview

5. Company History
• Founded in the mid-90’s by Peter
Dragone and John Slyvane who believed
coffee should always be served fresh –
whether at home or at the office.
• Launched first commercial single-cup
brewer in 1998
• Keurig was acquired in 2006 by Green
Mountain Coffee Roasters, Inc.(GMCR)
and is a wholly-owned subsidiary of
GMCR

6. Mission and Vision
 Mission Statement:
Brewing excellence one cup at a time®
 Vision:
Keurig vision is to be the leading
specialty coffee company by providing
the highest quality coffee, having the
largest market share in the targeted
market while maximizing the company
value.

7. • K-Cup® System is an original single-cup brewing maker which is designed
to brew a single cup of coffee, tea, hot chocolate, or other hot beverage
• Keurig also obtains, produces, and sells various kinds of coffee, teas, cocoa
and other form of beverages in K-cup portion packs and coffee in
conventional packaging style

8. Keurig Vue System
Keurig improves its technology with the advent of Vue® System as a huge step
of innovation.

9. Keurig Rivo System

10. Owned Brands
®
Licensing/Manufacturing Agreements

11. Our Global Supply Chain Footprint

12. Sumner, Wa Montreal, Canada
Vermont *
Toronto, Canada Reading, MA
Castroville, CA
Knoxville, TN
Our facilities
Canadian Business Unit
Keurig Business Unit
Specialty Coffee Business Unit
Enterprise Staff

13. Supply-chain partnerships
As our supply chain spans the globe, so does our supply-chain
outreach
CIAT /Catholic Relief Services
Central America, Guatemala
• Climate change adaptation
• Food security
Partners in Health
Mexico, Guatemala
• Health care - Food security
• Child and maternal health
• Environmental health
Grounds for Health
Mexico, Central America
• Women’s health
The Coffee Trust
Guatemala
• Food security - Education
• Income diversification
Coffee kids
Nicaragua, Guatemala, Mexico, Peru,
• Education - Income diversification
Heifer International
Mexico, Honduras, Peru
• Food security
Save The Children
Nicaragua, Honduras, Bolivia
• Children’s health - Food security
• Income diversification
Community Agro Ecology
Network
Nicaragua
• Food security - Youth training
Planting hope
Nicaragua
• Food Security
• Education
Café Femenino
Peru
• Access to clean water

14. Hawaii
Mexico
Colombia
Ecuador
Peru
Bolivia
Guatemala
El Salvador
Honduras
Nicaragua
Costa Rica
Panama Uganda
Brazil
Rwanda
Burundi
Vietnam

18. Cash Flow
Period Ending 29-Sep-12 24-Sep-11
Net Income $ 362,628 $ 199,501
Operating Activities, Cash Flows Provided By or Used In
Depreciation 187,697 119,794
Adjustments To Net Income 150,182 19,782
Changes In Accounts Receivables (159,317) (157,329)
Changes In Liabilities 35,954 205,368
Changes In Inventories (92,862) (375,709)
Changes In Other Operating Activities (7,369) (12,169)
Total Cash Flow From Operating Activities $ 477,785 $ 785
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures (401,121) (283,444)
Investments 137,733 -
Other Cash flows from Investing Activities (2,257) (904,228)
Total Cash Flows From Investing Activities (265,645) (1,187,672)
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid - -
Sale Purchase of Stock (64,378) 981,472
Net Borrowings (124,099) 223,317
Other Cash Flows from Financing Activities 3,283 -1,063
Total Cash Flows From Financing Activities (173,124) 1,199,845
Effect Of Exchange Rate Changes 1,124 790
Change In Cash and Cash Equivalents $ 45,300 $ 8,588

19. Short-term solvency, or liquidity, ratios 2011 2012
Current ratio 2.4 2.55
Quick ratio 0.98 1.07
Cash ratio 0.03 0.11

20. Long-term solvency, or financial leverage,
ratios
2011 2012
Total debt ratio 0.4 0.37
Debt-equity ratio 0.3 0.2
Equity multiplier 1.67 1.6
Time interest earned ratio 1.54 0.27
Cash coverage ratio 1.54 6.17

21. Profitability ratio 2011 2012
Profit margin 0.076 0.094
Return on assets 0.062 0.1
Return on equity 0.11 0.16

22. Strengths:
 The patented technology
 Large varieties
 Quality of product
 Longer shelf life of product
 Customer brand loyalty
 Brand awareness
Opportunities:
 Global market typically untapped
 Increasing in the growth of industry
 Quality considered important by
consumers
 Increasing trend of specialty coffee
drinkers
Weaknesses:
 Past failure strategic decision
 Inappropriate strategic vision
 Little brand presence
 Few strategic alliances
Threats:
 Decline in coffee consumption
 High competition
 Price volatility
 Heavy reliance on specialty coffee
farms

23. Where is the Keurig product in the life cycle?

24. How To Expand
• Growing our Keurig® hot brewing system in North America.
• Launching new brewer technologies.
• Entering new beverage categories.
• Expanding in current channels.
• Offering new brands.
• Entering new geographies, with an initial focus on four countries
worldwide.
• Executing operationally by focusing on continued quality improvement and
lowering overall costs.

25. Financial Conditions
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Revenue Gross income Profit Total current
assets
2011
2012

26. Marketing Advertisement
• Keurig TV- How Does Keurig Always Have My Favorite- - Official
Commercial 2012

27. Enhanced search: allow consumers to
easily find their favorite K-Cup® portion
packs by refining their search by options.
New comparison tools: Use the drag and
drop brewer comparison wizard for a side-by-side
comparison of brewer features and
specifications to find the perfect fit.
Store locator: Positioned within the site to
make it as easy as possible to purchase
Keurig products online or at thousands of
retail locations in both the U.S. and Canada.

28. Consumer engagement tools: product ratings
and review, and a social media share bar integrated
into the website to streamline sharing consumer
product passion on Facebook, Twitter and other
social media channels.
Fun and interactive experience: Visit the
Explore area to review and print delicious recipes,
view product demos, indulge in love letters from fans
and learn about seasonal offerings.
Improved loyalty program: Keurig's Coffee
Club program awards 1 point for every K-Cup
purchased on Keurig.com, starting with the first
order.

29. Analyzing The Presence Market

30. The Competition
• Competition in the single-cup brewing
system market was increasing as relatively
low barriers to entry encouraged new
competitors to enter the market, particularly
with typically lower-cost brewers that brewed
coffee packaged in non-patented pods.
• Many currents and potential competitors had
substantially greater financial, marketing, and
operating resources than Keurig such as
Nestlé (Nespresso and Dolce Gusto), Kracft
(Tassimo), and Mars (Flavia).

31. Nestle
• Nestle, which has a 35% global share
of the single-serve market, has only a
tiny presence in North America
• Wants a bigger share of the market in
the U.S.
• North America is the second-largest
market in the $8 billion single-serve
market
• Nestle dominates the European
market with a commanding 70% share

32. The Competitive Advantages
• Keurig has a strong brand in the field of the single-serve brewing coffee. It
is introduced in 1997.
• The partnership is one of the largest strengths of Keurig compared to other
competitors.
• Keurig is available in many different distribution channels.
• Strength of Keurig is related to the patented technology.
• The large majority of customers said that they feel enjoy with Keurig
products and services

33. The Competitive Advantages
Keurig is a advanced, personal beverage system:
• A premium experience brought into the home.
• A network system effect.
• A brand accelerator.
• An in-home beverage creation system.
• An enabler to understand the demand signal in home

34. Internal Factor Evaluation Matrix
Key internal factor Weight Rating Weighted score
Internal Strength
The patented technology 0.05 4 0.2
Large varieties 0.1 3 0.3
Quality of product 0.1 4 0.4
Longer shelf life of product 0.1 4 0.4
Customer brand loyalty 0.05 4 0.2
Brand awareness 0.1 4 0.4
Internal Weakness
Past failure strategic decision 0.2 2 0.4
Inappropriate strategic vision 0.1 1 0.1
Little brand presence 0.1 1 0.1
Few strategic alliances 0.1 1 0.1
Total 1.0 2.6

35. Key external factor Weight Rating
Weighted
score
Opportunities
Global market typically untapped 0.15 2 0.3
Increasing in the growth of industry 0.15 2 0.3
Quality considered important by consumers 0.10 3 0.3
Increasing trend of specialty coffee drinkers 0.15 3 0.45
Threats
Decline in coffee consumption 0.1 1 0.1
Decline in coffee consumption 0.1 2 0.2
Price volatility 0.05 2 0.1
Heavy reliance on specialty coffee farms 0.2 2 0.4
Total 1.0 2.15

36. Competitive profile matrix
Keurig Procter gamble Nestle
Critical success factors Weight Rating Score Rating Score Rating Score
Advertising 0.1 1 0.1 3 0.3 3 0.3
Product quality 0.2 2 0.4 1 0.2 1 0.2
Price competition 0.05 2 0.1 2 0.1 1 0.1
Management 0.1 3 0.3 3 0.3 4 0.4
Financial position 0.1 3 0.3 4 0.4 4 0.4
Customer loyalty 0.15 2 0.3 1 0.15 1 0.15
Global expansion 0.15 4 0.6 4 0.6 4 0.6
Market share 0.15 3 0.45 4 0.6 4 0.6
Total 1 2.55 2.65 2.75

37. Internal Strategic Position External Strategic Position
Financial Strength
• Return of investment: 6
• Financial and operating leverage: 5
• Liquidity: 6
• Working capital: 4
• Cash flows: 5
Average: 5.2
Industry Strength
• Growth potential: 5
• Profit potential: 6
• Financial stability: 6
• Resource availability: 4
• Ease of entry: 5
• Capacity utilization: 3
Average: 4.8
Competitive Advantage
• Market share: -5
• Quality: -2
• Product life cycle: -2
• Customer preference: -2
• Technological innovation: -1
• Sound supply chain: -2
Average: 2.3
Environmental Stability
• Technological changes: -5
• Inflation: -5
• Demand elasticity: -5
• Competitor’s price ranges: -1
• Barriers to entry: -3
• Competitive pressure: -6
• Ease of exit: -5
• Price elasticity of demand: -5
• Risk exposure: -3
Average: 4.2

40. Quantitative Strategy Planning Matrix

41. Quantitative Strategy Planning Matrix
Key internal factor Weight
Market Development
The innovative
strategy
The multi-channel
strategy
The creative
strategy
AS TAS AS TAS AS TAS
Internal Strength
The patterned technology 0.05 4 0.2 3 0.15 4 0.2
Large varieties 0.1 1 0.1 2 0.2 1 0.1
Quality of product 0.1 4 0.4 4 0.4 4 0.4
Longer shelf life of product 0.1 3 0.3 4 0.4 3 0.3
Customer brand loyalty 0.05 4 0.2 4 0.2 3 0.15
Brand awareness 0.1 3 0.3 3 0.3 4 0.4
Internal Weakness
Past failure strategic decision 0.2 1 0.2 1 0.2 1 0.2
Inappropriate strategic vision 0.1 2 0.2 2 0.2 2 0.2
Little brand presence 0.1 1 0.1 1 0.1 1 0.1
Few strategic alliances 0.1 2 0.2 3 0.3 1 0.1
Total 1.0
Key external factor
Opportunities
Global market typically untapped 0.15 2 0.3 1 0.15 1 0.15
Increasing in the growth of industry 0.15 3 0.45 2 0.3 2 0.3
Quality considered importantly by consumers 0.10 4 0.4 4 0.4 4 0.4
Increasing trend of specialty coffee drinkers 0.15 3 0.45 3 0.45 3 0.45
Threats
Decline in coffee consumption 0.1 4 0.4 3 0.3 4 0.4
High competition 0.1 3 0.3 3 0.3 3 0.3
Price volatility 0.05 3 0.15 4 0.2 2 0.1
Heavy reliance on specialty coffee farms 0.2 1 0.2 2 0.4 1 0.2
Total 1.0
Total sum of attractiveness score 4.85 4.95 4.45

42. The Problems
The product price
The financial debt

43. Market Development
Innovative Strategy
Multi-channel
Strategy
Creative Strategy

44. The Timetable

45. The Timetable