Keurig Green Mountain Sued for $600M by Club Coffee - Analyst Blog

Keurig Green Mountain Inc.'s (GMCR) new Keurig 2.0 brewer has agitated many coffee makers for its anti-competitive issues. Only a fortnight after being sued by Rogers Family Co. on anti-competitive grounds, Reuters reported that the Vermont-based Keurig coffee maker is facing the same allegations from Canada's Club Coffee for spreading misleading information about competitors' coffee pods to confuse customers.

Demanding $600 million in damages, Club Coffee has alleged that with its new Keurig 2.0 brewer, Keurig Green Mountain is engaging in anti-competitive measures and using its dominance in the brewer market to bar rivals from competing with its K-Cup packages of coffee and other hot beverages. The company is also trying to keep single-serve prices artificially high in the market.

Keurig Green's Keurig 2.0 brewing system does not accept coffee pods made by other companies, as the system uses interactive readability technology (‘lock-out technology') that will work only with Keurig's licensed K-Cup pods.

Canada's Club Coffee's claim comes closely after California-based coffee maker Rogers Family Co. requested the Manhattan court to block sale of Keurig 2.0 system in Sep 2014. However, the brewing system received favorable ruling on Sep 19 when U.S. district judge Vernon Broderick refused to block sale of the brewer, per media reports.

Moreover, in February, coffee maker TreeHouse Foods Inc. (THS) charged Keurig with attempting to lock out competition in the single-serve brewing business with its new Keurig 2.0 brewing system in the United States District Court for the Southern District of New York.

The Keurig 2.0 brewing machine debuted in Canada last month. Green Mountain's K-Cup sales, which forms a major part of its revenues, is losing share to private labels which imitated K-Cups post its patent expiration in 2012.

In order to remain competitive, especially after the K-Cup patents expired, Keurig carrying a Zacks Rank #3 (Hold) has formed several strategic agreements with coffee and beverage companies like Kraft Foods Group, Inc. (KRFT), Starbucks Corp. (SBUX), Unilever plc (UL), Eight O'Clock and Dunkin' Donuts (DNKN) to offer the signature hot drinks of these companies in its K-Cup and Vue packs.

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