NEW YORK (Reuters) – A new countertop device by Keurig Green Mountain Inc will drive long-term growth for the company following recent sales declines in its core business of single-serve coffee pods and brewers, the company’s chief executive officer said in an interview on Monday.
Keurig invested about $US100 million in the device in fiscal 2015 and plans to spend a similar amount in the next fiscal year, said Chief Executive Officer Brian Kelley, who called the device Keurig’s “next growth engine.”
His remarks come amid scepticism from analysts and investors that the machine known as Keurig Kold will take off. It is due to be launched on Tuesday on the company’s website and in six U.S. cities.
Analysts have cited a high price of $US299 to $US369 per unit, a slower than anticipated rollout and recent trends in soda consumption in the United States.
Coca-Cola Co and Dr. Pepper Snapple Inc are partnering with Keurig, best known for its single-serve coffee machines, on new flavour pods for the machine, which can make a cold drink in 90 seconds without any ice.
But soda sales volumes have been falling in the United States for about a decade, and analysts have questioned the growth potential for devices that make soft drinks at home.
That, along with the increased competition Keurig faces in coffee pods and slower-than-expected adoption of new brewers, has pressured the company’s stock price. In the company’s third quarter ended June 27, pod sales declined 1 per cent while brewers and accessories were down 26 per cent.
Shares, which closed at $US53.19 on Monday, have lost 60 per cent of their value since the beginning of the year.
Kelley said the perception of the device as being designed mainly for making soda was too narrow. “The Street sees it that way because of our relationship with Coke,” he said. “The reality is when we put this machine in consumers’ homes, they drink everything.”
He noted that the machine could produce a variety of cold drinks including iced tea and flavored water.
Analysts have also questioned whether consumers will pay for a device that demands countertop space in the kitchen. Kelley said that Kold will earn its space on the counter, given that people drink a variety of cold beverages more often than hot drinks.
(Editing by Matthew Lewis)
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