Green Mountain Coffee Roasters (GMCR) started as a small café in Waitsfield, Vermont in the year of 1981. It was in 1993 that the company went public and acquired the early phase of Keurig Incorporated Inc, and then completed the acquisition in 2006. (Unknown.( 2004). Gmcr.Retrieved from http://www.gmcr.com/about-GMCR.html) Once these two companies combined it made the way we drink beverages different than ever before in both the home and office. According to GMCR’s website “Today, GMCR is recognized as a leader in specialty coffee and coffee makers, and acknowledged for its award-winning coffees, innovative brewing technology, and environmentally and socially responsible business practices.” ((Unknown.( 2004). Gmcr.Retrieved from http://www.gmcr.com/about-GMCR.html)
GMCR has three business units that they operate with today. The first being specialty coffee which includes Green Mountain Coffee, Tully’s Coffee, Diedrich Coffee, and Coffee People. The 2nd unit is the Keurig business unit, which created the signal cup brewing system. The 3rd and final is the GMCR Canada. The GMCR Canada is owns all sales for the company and includes the Van Houtte business as well as Timothy’s World Coffee brand. ((Unknown.( 2004). Gmcr.Retrieved from http://www.gmcr.com/about-GMCR.html)
The current CEO is Brian Kelley who joined GMCR in 2012. Before GMCR Brian Kelley was Coca-Cola’s Chief Product Supply Officer , and president and CEO of SIRVA, Inc. ((Unknown.( 2004). Gmcr.Retrieved from http://www.gmcr.com/about-GMCR.html) as well as other companies such as Ford Motor Company, GE, and Proctor and Gamble.
In 2011 net sales were 2,650.9 million which was up 95% over fiscal 2010. (http://investor.gmcr.com/releasedetail.cfm?ReleaseID=622448) The acquisition of Van Houtte which took place in December, 2010 in addition to the partnership with Starbucks and Dunkin Donuts with the K-cups option of their coffee has helped add over 321.4 million to the net sales in 2011. (http://investor.gmce.com/releasedetail.cfm?ReleaseID=622448) GMCR has seen accelerated growth over the last couple of years due to its Keurig single cup brewing system and the K-cups that go along with it. Below is the breakout for the 2011 Fiscal Financial Review provided by (http://investor.gmcr.com/releasedetail.cfm?ReleaseID=622448). 2011 2010 $ Increase
S1-Strong reputation with it’s customersW1- Keurig single-cup brewers all made by one manufacture S2-AcquisitionsW2-Large % sales from one area of the business (K-cups & brewers) S3-Marketing W3-Forecasting due to such overnight success
O1- Increase marketing to the age group of 40 and older T1- Risk of patents expiring allowing other competitors into the market O2-Increase marketing in the Supermarket locationsT2- Keurig single-cup brewers all made by one manufacture O3- Introduce other manufacturesT3-Product recalls & product liability
T4- Coffee availability
ANALYSIS VIA PORTER’S FIVE FORCES MODEL
The threat of new entrantsThe bargaining power of buyersThe bargaining power of suppliers The competition of this type of product & service because of cost overhead would need to come from an already known company or a company that becomes successful after the patients expire that GMCR hold. Strong threatOver time as patients expire buyers will have bargaining power. ThreatGMCR has one manufacuting for the K-cups and brewing systems which resides in China. Weakness The threat of substitute product and servicesThe intensity of rivalry among competitors in an industry The threat of substitution is high. ThreatAlthough there are other companies that try to offer the same service, GMCR is at the top of the coffee industry for this type of service. Strength
GMCR is using a differentiation strategy by offering a different way for the consumer to enjoy specialized coffees, teas, hot chocolate, and other hot beverages in their own homes, workplaces, and hotels at an overall lower cost than coffee houses. They are able to do this by taking the lead in the market due to their strengths in product development, licensing agreements with partners, and on-going successful acquisitions. GMCR growth through their acquisition strategy and their licensing agreements have been the biggest contributors to their growth. In 1998 when Keurig launched its first single- cup brewer for the office environment GMCR was there to partner with. (Dess,G, Lumpkin, G. & Eisner, A.(2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.)
From that point on it just continued whether it be the agreement with Starbucks in 2011 or the agreement with Dunkin Donuts in that same year to sell K-cup’s with both Starbucks and Dunkin Donuts coffee they continue to thrive in the market. If we look at Porter’s generic strategies that our text talks of we can identify the following. •Differentiation – The product and service that GMCR brings to the market is the best value for price and quality. •Focus strategy – The acquisitions and licensing agreements that GMCR has been able to focus on continues to allow success to the buyer markets and geographic markets. •Overall cost leadership – GMCR is able to keep cost low because of the amount of product they supply to the customer without much competition.
THE ISSUES AND CHALLENGES FACING THIS COMPANY
I think for now GMCR will continue to have competitive advantage. GMCR should be able to accomplish this by continuing to offer their K-cups and brewing systems at the same competitive price to the same type of customer. Although patents are ready to expire and more of the product and service will be able to join the market, I feel that GMCR with their past record of new product innovation will continue to strive in the coffee market and lead the way for competitors to follow.
COURSE OF ACTION RECOMMENDED
It seems to be that because of the success of Keurig & K-cups that GMCR has put all their eggs in one basket without much focus on the rest of their products. We can see this in both the 2010 and 2011 earnings (http://investor.gmcr.com/releasedetail.cfm?ReleaseID=622448). With patents becoming expired in the near future by recommendation would be that GMCR starts to focus on the other products that they sell or that they start to work on the next great product for the coffee industry. My fear is once patents expire that you may see some of the larger distributers try to come into the Market and possible succeed if there able to produce the same product at a lower cost.
My opinion of the case study is first I had no idea that GMCR was such a large company. I don’t drink coffee but am a tea drinker and I guess I just didn’t pay much attention to the marketing and advertising . I’m sure they would like to hear this feedback, it may give them a clue as to where the marketing needs to go during the next phase. With that being said this company to me shows the true meaning of great business leadership and a successful supply chain and focus strategy. During the research I even found a joint venture with 3M the company I work with. It seems that 3M helped GMCR develop a coffee filter. This was a very enjoyable case study and it showed a great example of how to be successful in my opinion.
Dess, G., Lumpkin, G. & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.
Green mountain coffee roasters, inc.. (09/1). Retrieved from http://investor.gmcr.com/releasedetail.cfm?ReleaseID=622448
Unknown. (2004). Gmcr. Retrieved from http://www.gmcr.com/about-GMCR.html