2014 Executive of the Year Brian Kelley
Keurig Green Mountain CEO cultivates beverage brewer, brand innovation
As the chief executive officer of Waterbury, Vt.-based Keurig Green Mountain Inc., Brian Kelley describes his leadership style as challenging and fast-paced but open. But he’s also adamant about being a good listener — both to his employees and consumers. This year, Kelley’s leadership traits particularly came in handy as the company entered uncharted waters with the development of two new beverage-making platforms that relied on consumer feedback.
For instance, when the company asked consumers who don’t own a Keurig brewing system why they haven’t purchased one, the No. 1 response was that it doesn’t brew a pot of coffee, Kelley explains. Therefore, the company recently released the Keurig 2.0 brewing system, which is the first in the company’s portfolio to brew both a single cup and a four-cup carafe from a Keurig-branded pack.
“It was all about listening to consumers and making sure that we had their interests at heart when we designed the new machine, and then we raced to quickly get it there,” he says.
Moreover, six years ago and prior to Kelley’s leadership of the company, the team listened to consumers ask for a Keurig machine that makes cold, carbonated beverages with the same simplicity and convenience as the Keurig hot-brewing system, Kelley says. This year, with Kelley at the helm, Keurig Green Mountain announced its collaboration with Atlanta-based The Coca-Cola Co. to bring Coca-Cola’s brands to life through the Keurig Cold system, which is scheduled for release in Keurig Green Mountain’s fiscal year 2015.
Under Kelley’s leadership, the company also changed its name and partnered with numerous bev-erage companies to make more brands available in K-Cup pack formats, all while experiencing positive net sales quarter after quarter. Plus, it achieved a 92 percent employee retention rate last year. For these reasons and more, Beverage Industry named Kelley its 2014 Executive of the Year.
Kelley began his career in sales and marketing at Procter & Gamble before climbing the ladder at other companies, including the Ford Motor Co., General Electric (GE) and The Coca-Cola Co. At The Coca-Cola Co., he took on various roles, including president of Coca-Cola’s North American Business Integration and president and general manager of still beverages and supply chain in North America. Most recently, he served as chief product supply officer at Coca-Cola Refreshments and was named president of Coca-Cola Refreshments prior to his departure in December 2012.
Considering his five years of experience at The Coca-Cola Co., Kelley was no stranger to the company’s beverage portfolio when it came time for Keurig Green Mountain to partner with the company for the launch of Coca-Cola’s brands in the Keurig Cold system.
“The brands, the global footprint, and the marketing capabilities are what made it natural for us to go to Coke for this partnership,” Kelley says. “And the fact that I was there made it easier for me to be aware of those things and to know the people there to try to make it work.”
Keurig Green Mountain announced its long-term strategic partnership with The Coca-Cola Co. in February. At the same time, The Coca-Cola Co. purchased a 10 percent stake in the company and later announced its intention to raise the stake to 16 percent.
When the Keurig Cold system hits retail stores next year, it will offer a range of The Coca-Cola Co.’s still and carbonated beverages, including sodas, energy drinks, sports drinks, juice drinks and more, and it also will offer a full line of Keurig Green Mountain brands. The company’s own brands will span sodas, juice drinks, seltzer waters, flavored waters, sports drinks and more, Kelley notes.
However, creating the appliance to dispense this variety of cold beverages was no easy task — especially considering consumers’ extensive requests. Specifically, consumers asked for a machine in which they could insert a pod, push a button, and get a cold drink, but they didn’t want it to have a carbon dioxide tank, they wanted the liquid to come out perfectly cold, they wanted it to be able to fit on a countertop, and they wanted it to make all of the brands that they love to drink cold, Kelley explains. Plus, Kelley and his team knew it was vital to ensure consistency between The Coca-Cola Co.’s and potential other partners’ brands and the Keurig Cold versions of those brands.
“You can’t take some of the world’s best-known brands in beverages and not deliver them perfectly every time,” he says. “We had to be able to dose the syrup, blend the flavorings, and then deliver the carbonation level that that brand required. All of that had to be pulled together in a machine that then could be affordable and could fit on a consumer’s counter in [his or her] kitchen.”
Thus, Keurig Green Mountain’s technical team and innovation engineers have been working to create Keurig Cold’s patented process for delivering the beverages according to consumer specifications. The resulting machine will initially come in one basic form with multiple color choices and other options, Kelley notes. The Keurig Cold pods will be manufactured out of a pre-production pilot facility in Williston, Vt., and a larger facility in Lithia Springs, Ga. Both facilities are slated to open in the company’s fiscal year 2015, Kelley says.
However, creating the necessary technical advances in order to make the Keurig Cold machine was only one of two at-home appliance accomplishments this year. The second was the Keurig 2.0 system.
From cup to carafe
According to Kelley, the Keurig 2.0 is “the biggest consumer launch we’ve ever done since the original Keurig.” The new hot-brewing system made its way into retail stores nationwide last month. However, getting the system retail ready took plenty of innovation. In particular, engineering a pod that could produce multiple cups of coffee while being small enough to fit in the machine required a lot of technical work, patents and technology, he notes.
“We had to do some very unique work on the beverage itself, on the extraction, [and] on the yield, and it probably points to what we call system innovation,” Kelley explains. “We manage, design and develop all four parts of the Keurig system — the pod itself, the beverage inside the pod, the appliance with over 500 components, and then we actually design and have the [intellectual property] for the manufacturing lines that make the pods — so when you look at the technology involved, we had to innovate across each of those systems in order to bring this to life very quickly. In less than 14 months, we went from idea to launch of this idea, but it’s only because we used system innovation where we designed all four components at once to be able to launch.”
As a result, the Keurig 2.0 system is the first in Keurig’s portfolio to brew both a single cup and a carafe, as well as to feature Keurig 2.0 Brewing Technology, which enables the brewing machine to recognize the type of pod by reading the lid and optimize the brew accordingly. The system currently is offered in three varieties: the K300 Series, K400 Series and K500 Series. With a suggested retail price between $139.99 and $149.99, the Keurig 2.0 K300 Series features nine brew sizes ranging from 4 to 30 ounces with a 60-ounce water reservoir and a grayscale touchscreen with strength control. The next step up is the K400 Series, retailing for between $159.99 and $169.99. This brewer also offers nine brew sizes ranging from 4 to 30 ounces but with a 70-ounce water reservoir. Other key features include a color touchscreen with customizable wallpaper and programmable controls, including auto on/off, auto brew for K-Carafe packs, strength control, a customizable clock and a favorites setting. The K500 Series has a suggested retail price between $189.99 and $199.99 and features 10 brew sizes ranging from 4 to 30 ounces. It offers an 80-ounce water reservoir; a hot water on-demand feature; a large color touchscreen with customizable wallpaper; and a variety of programmable controls, including strength control, auto on/off, auto brew for K-Carafe packs, a programmable clock, a favorites settings option, and a customizable night light. Stainless steel thermal carafes are sold separately.
Over time, the new Keurig 2.0 platform will replace the original Keurig at-home reservoir brewers, which kickstarted the single-cup coffee phenomenon in 2003. The original Keurig platform consists of four brewers at different price points, Kelley notes. Halfway through 2015, the company plans to launch a fourth Keurig 2.0 brewer on the lower end of the price spectrum, which will complete the replacement of the original reservoir brewer lineup, he says. The company has not yet announced its intentions for its lowest-priced Keurig Mini brewer model, which has a single-use water tank and is designed for spaces such as hotel or dorm rooms or small home offices.
The Keurig 2.0 brewers currently accept single-serve K-Cup packs and Vue packs and new multi-serve K-Carafe packs, but a new pod size will make its debut in the spring, Kelley says. K-Mug packs will brew beverages between 16 and 18 ounces in size, he notes. Ultimately, more than 290 varieties and 50 brands will be available in varying pack formats in order to continue to give consumers the variety, convenience and simplicity that they love, he adds.
Kelley also notes that when the Keurig Cold machine comes out next year, its pods will be a different size than the K-Cup packs, Vue packs or K-Carafe packs for the Keurig 2.0 hot-brewing system. Both the cold and hot types of pods were designed in such a way that they will only fit into their respective brewers, Kelley explains.
Licensed to sell
Whether hot or cold, the company aims to bring all premium beverages from all non-alcohol beverage categories under the Keurig at-home format, Kelley says. This coincides with the company’s mission of having a Keurig brewer on every counter and a beverage for every occasion. It also points to the importance of welcoming outside brands into the Keurig system to make this goal possible.
By partnering with competitive brands to bring them under the Keurig umbrella, the company is able to deliver on consumer requests for variety. Consumers have said that they want the choice of a variety of brands so that they can appeal to everyone in their household as well as guests, Kelley says. Although partnering with competitors is unconventional, this strategy has driven the success of the Keurig model, he adds.
“The consumer wants choice,” Kelley says. “As [new, competing brands] come in, they make the system stronger, and then the system makes the brands stronger because all of a sudden your brand now is available in a new format … so it’s more opportunity for trial of every brand, so it’s a brand builder in a unique way, and then brands help build the Keurig system. We like to think of it like a virtuous cycle, where the more brands that come in, the bigger the network gets, and the bigger the network gets, the more brands that want to come in. So you have this process where Keurig gets stronger, the brands get stronger, and it really works in synergy.”
In Kelley’s nearly two years as chief executive officer, the number of “competing” brands joining the Keurig portfolio continues to increase. This year alone, approximately 15 new brands have joined the roster.
In addition to its partnership with The Coca-Cola Co. for beverages for its Keurig Cold brewing system, last month Keurig Green Mountain expanded its partnership with the beverage-maker to offer a few of its still beverage brands for the Keurig hot-brewing system. Honest Tea is The Coca-Cola Co.’s first brand available in K-Cup packs. Unsweetened Honest Tea Just Green and Just Black iced teas have joined Keurig’s current Brew Over Ice collection, which enables consumers to brew hot beverages over ice using the Keurig hot-brewing system, the company explains.
In another significant move, Keurig Green Mountain recently partnered with Kraft Foods Group Inc., Northfield, Ill., to bring Kraft’s Maxwell House, Gevalia, Yuban and McCafé brands into the Keurig family this fall. This includes K-Cup and K-Carafe packs for Keurig at-home brewers as well as the Keurig Bolt pack for the Keurig Bolt away-from-home carafe brewing system.
This year, the company also an-nounced new partnerships with Nestlé USA’s Coffee-mate brand, Peet’s Coffee & Tea, and Krispy Kreme as well as renewed partnerships with Starbucks Coffee Co. and The J.M. Smucker Co.’s Folgers, Folgers Gourmet Selections, Café Bustelo and Millstone brands, among others.
Additionally, the company announced a number of new retailer partnerships, Kelley notes. For instance, Target’s Archer Farms brand, BJ’s Wholesale Club’s Wellsley Farms brand, and Harris Teeter’s namesake brand all are available in K-Cup packs, he notes.
Keurig Green Mountain also manufactures 23 of its own brands, 13 of which are available in K-Cup pack formats, including Green Mountain, Tully’s, Timothy’s, Barista Prima, Donut Shop, Donut House, Van Houtte and Café Escapes. Many of these brands are performing very well in the marketplace, Kelley says. For instance, its Donut Shop K-Cups increased 226 percent in dollar sales for the 52 weeks ending July 13, compared with the prior-year period, according to data from Chicago-based Information Resources Inc. (IRI). In more recent years, its Café Escapes brand added Milk Chocolate, Dark Chocolate and Caramel varieties to its lineup, he notes.
“Our objective is to have all the brands in there that consumers want,” Kelley says. “We view this as the new way to drink premium coffees at home, so we want the premium brands available in Keurig so that the consumer can experience that great-tasting flavor at home.”
Building on past success
This brand variety, combined with the Keurig hot-brewing system’s simplicity, quality, sustainability and convenience, has driven purchases of Keurig at-home single-cup brewers for the past 11 years and will continue to drive purchases in the future, Kelley says.
“[Consumers] love the simplicity of you push a button, you get a cup of coffee, [and] they love that it’s the perfect taste every time,” he expounds. “They get as good a cup of coffee or tea or hot chocolate as they can get anywhere.” Plus, although the company still is working to make its K-Cup packs recyclable, consumers appreciate that the brewers are sustainable in terms of water use and energy footprint, he adds. Its upcoming Keurig Cold system will follow these same principles, he notes.
Finally, the convenience and personalization of making their own beverages at home has driven consumers’ purchase of Keurig brewers, Kelley says.
“The consumer loves to play a role in creating their beverages, and that’s what they feel like they’re doing when they make them at home,” he says.
To date, more than 35 million Keurig brewers and 20 billion K-Cup packs have been sold, according to company data. For its most recent fiscal third quarter, Keurig-owned and -authorized portion packs increased 10 percent in net sales, compared with the prior-year period, the company reports. With more than 132 million households in America alone, according to 2013 data from the U.S. Census Bureau, there is plenty of room to grow.
“We’ve been able to launch products that continually upgrade and improve the experience of the consumer and bring Keurig to new places,” Kelley says.
By reaching as many households and consumers as possible, Keurig Green Mountain also is fulfilling industry trends for natural, authentic, health-oriented products, Kelley notes. For instance, the company makes a line of Vitamin Burst Brew Over Ice pods that are naturally sweetened, colored and flavored and fortified with vitamin C. It also offers Green Mountain Naturals pods in Hot Apple Cider and Lemonade varieties. Furthermore, Keurig Green Mountain has been the largest buyer of Fair Trade coffee in the world for three consecutive years, Kelley says, citing Fair Trade USA data.
“We believe we can be the carrier, the vehicle, the form factor that allows the consumer to experience more of those trends in their home and not have to leave their home to get those kinds of beverage benefits,” he says.
Yet, in order to grow and build on the company’s more than a decade of success, Kelley notes that continual innovation is critical.
“It’s really about making sure that we have the expertise to continually advance that innovation, to continually disrupt the marketplace with new innovation, [and] that we foster a culture that really values creative thinking [and] values different approaches to problems,” he says. “If we have that capability inside the company to constantly innovate and constantly better ourselves, then we’ll maintain the kind of success we’ve had in the marketplace.”
A change of name
This past spring, Green Mountain Coffee Roasters Inc. (GMCR) changed its name to Keurig Green Mountain Inc. According to Chief Executive Officer Brian Kelley, there are three reasons behind the change.
The first reason is to signify that the company does more than just coffee, he says.
“The second reason is because Keurig is now a very large part [of the company],” Kelley adds. “More than 90 percent of our revenue is Keurig system based. Therefore, it would not seem right or fair to not have Keurig in the name.
“Finally, we combined the two because we finished the integration this year of the two companies,” he concludes. In 2006, GMCR purchased Keurig Inc. and they were run largely as two independent companies, he explains. This year, the integration of the two companies was completed. Thus, the name change signifies that move, he adds.