Will Roger Family's Code-Break Claim Affect Keurig Sales? - Analyst Blog

Keurig Green Mountain Inc.'s (GMCR) new brewer Keurig 2.0 has been a bone of contention among coffee makers for quite some time for its anti-competitive issues, as the new Keurig 2.0 brewer comes with an interactive readability technology (‘lock-out technology') that works only with licensed pods. That means Keurig's new brewing system does not accept coffee pods made by other companies, thus ruling out competition.

Other coffee makers like Treehouse Foods Inc. (THS), Rogers Family and Canada's Club Coffee claimed that Keurig Green Mountain has used its dominance in the brewer market to bar rivals from competing with its K-Cup packages of coffee and other hot beverages. (Read: Keurig's 2.0 Brewer Continues to Irk Rivals).

In Sep 2014, California-based coffee maker Rogers Family Co. even filed a suit in September in a Manhattan court against Keurig Green Mountain requesting the jury to block Keurig 2.0 system. However, the brewing system then received a favorable ruling, per media reports.

However, recently, Rogers Family Co. has come up with a new technology called Freedom Clip which will enable a Keurig 2.0 brewer to recognize and brew non-Keurig coffee pods.

Per media reports, Rogers claims that it has decoded the formulation used by Keurig Green Mountain to lock out non-Keurig coffee pods which has been used in the device. The company will ship the first 10,000 Freedom Clips for free to promote the product.

After the expiry of the K-cup patents in Sep 2012, competition intensified for Keurig Green Mountain. To counter the situation, the Zacks Rank #2 (Buy) company launched Keurig 2.0 brewing machine and also formed several strategic agreements with coffee and beverage companies like Kraft Foods Group, Inc. (KRFT) and Starbucks Corp. (SBUX) to offer the signature hot drinks of these companies in its K-Cup and Vue packs.

We feel that the Freedom Clip, if successful, may dent Keurig Green Mountain's sales. This is also expected to increase competitive pressure and encourage private label owners to develop their own K-cups and pods.