Keurig is under pressure.
The instant coffee brewer company’s shares have been declining amid a recall of its MINI Plus Brewing System. The inventor of the brand’s K-Cups has criticised his own product for being bad for the environment.
And customers who bought the Keurig 2.0 on Amazon complain that they realised they needed a new kind of coffee pod for it to work only after they had bought the machine.
Despite these setbacks, Keurig Green Mountain’s business will likely thrive in the future, according to a recent report by Morgan Stanley.
Here are a few reasons analysts believe Keurig will dominate.
1. K-Cup sales are growing.
Widespread criticism hasn’t kept people from buying Keurig’s K-Cups, the pods needed to make beverages in the instant brewer.
Sales of K-Cups are up 18% in the second quarter.
While sales of the actual brewers are lagging, healthy K-Cup sales are more important to Keurig.
The boost in sales shows that once people make the initial investment, they are loyal customers who keep using the machine.
Soaring K-Cup sales are proof that Keurig is more than a fad.
2. Keurig is getting into cold beverages.
Keurig’s new KOLD machine is a single-serve brewer for cold beverages like iced coffee, sodas, sports drinks, and iced tea.
Cold brew coffee is a growing trend, with Starbucks recently adding it to the menu.
The new machine could also help Keurig reach new customers, especially children and teens, according to Morgan Stanley.
American households consume an average of six cold beverages a day, compared with two servings of coffee.
Morgan Stanley writes that 24% of consumers surveyed said they were “very interested” in the KOLD brewer.
Keurig will announce more details, like a launch date, in May.
3. Many people don’t use Keurig.
Keurig hasn’t managed to saturate American households — and that’s great news for the company’s growth potential.
Single-serve coffee brewers make up just 14% of the industry, according to Morgan Stanley. Ground coffee accounts for 78% of product sold, while instant coffee has 8% of the market.
Keurig is the dominant player in the industry, giving it the opportunity to reach new customers.
Once more people buy the Keurig, it’s likely they will keep buying pods and driving the company’s profits.
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