Keurig Green Mountain Recalls 7M Brewers, Shares Decline - Analyst Blog

Keurig Green Mountain Inc.'s (GMCR) shares dipped 2.3% on Dec 23, 2014, after it announced the recall of approximately 7 million MINI Plus Brewing System units on grounds of complaints regarding the product on the same day.

Keurig Green Mountain received almost 200 reports across the U.S. and Canada of hot liquid leaking from the brewers during use. It decided to recall the units after receiving approval from the U.S. Consumer Product Safety Commission (CPSC) and Health Canada.

However, Keurig Green Mountain has specified that the brewers manufactured before Jul 2014 were the once that were affected. The company has also promised to provide a free repair kit to the owners of affected MINI Plus brewers.

Keurig MINI Plus brewers brews coffee, tea, hot cocoa or iced beverage in two minutes. It offers a choice of three cup sizes, and also a removable drip tray to accommodate short travel mugs.

The recall of MINI Plus brewers comes during the holiday season when the retailers expect a surge in sales.

Moreover, Keurig Green Mountain is facing criticism from other coffee makers for quite some time regarding its latest Keurig 2.0 brewing system. The new brewer, launched in September this year, comes with an interactive readability technology (‘lock-out technology') that works only with licensed pods. Analysts also criticize that the new brewing system does not accept coffee pods made by other companies, thus ruling out competition.

Coffee makers like Treehouse Foods Inc. (THS), Rogers Family Co. 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)

Recently, Rogers Family 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.

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.