Keurig Green Mountain’s at-home cold drink maker will cost a cool $300. But Wall Street analysts fret that lofty price might get a chilly response.
Keurig, known for its popular, single-serve Keurig coffee pods, revealed new details about the planned “Keurig Kold” system, a device for dispensing carbonated drinks, juices, sports drinks and teas. In addition to developing the new drink maker, the company has been busy signing up key partners like Coca Cola (KO) and Dr Pepper (DPS) to provide formulas for the device.
The Kold system is expected to debut this fall.
“We expect to revolutionize cold beverages in the home just as our hot platform is revolutionizing the coffee and tea categories,” Chief Executive Brian Kelley told analysts during a presentation, as if announcing a life-saving vaccine.
But analysts were worried about price. They seemed to think it might be too high.
“The biggest question is on price of the machine,” said William Chappell, a SunTrust Robinson Humphrey analyst, echoing the concern of others during the presentation. He asked if there is a way for Keurig, which traditionally subsidizes the initial cost of the machines in hope of profiting from the sale of pods over time, to be made more affordable.
“We are very confident about the pricing,” Kelley said in response to Chappell’s question. “Consumers see this very different than a coffee machine. This is a new piece of technology.”
Keurig (GMCR) is planning to debut a slew of branded products with Coca Cola and Dr Pepper, as well as its own branded craft sodas and other cold drinks. It will begin selling the device on its website this fall, followed by a broader retail premiere that will be finalized ahead of the 2016 holiday season.
Kelley said the roll out will be slow. But he voiced optimism for demand, saying the potential market for at-home cold beverage making is five times that for hot beverages like coffee and tea. Cold drinks are more diverse, including sodas, flavored waters, iced teas and sparking water. People also drink them more often during the day, he emphasized.
Keurig unveiled some new details about the upcoming Kold including the ability to make them at about 39 degrees in roughly 60 seconds. Each drink comes in eight ounce servings, with most drinks at 100 calories or less per serving.
The company could certainly use a hit. Overall sales for the first six months of the current fiscal year have only increased 1% to $2.5 billion because of weaker demand for the company’s brewers and accessories. Earlier this month, Keurig said it would bringing back its old coffee pods that allowed customers to brew non-Keurig coffee in an effort to boost interest in the company’s latest machine. Previously, those brewers would only brew Keurig-branded coffee cups, not other brands like Starbucks.
Kold is often compared to SodaStream (SODA), though Keurig executives bragged that the technology behind their new drink machine is more innovative and unique to the market. That brings up concerns about pricing again. SodaStream’s devices are generally sold at $99, but Keurig said retailers will likely charge $299 to $369 for Kold.
SodaStream is having a tough time after first warning last fall that its drink carbonation systems had failed to win over enough new converts. Sales have been sliding, and SodaStream has had to regroup, pulling back on marketing its products in the U.S. Until launching new ones later this year.
Keurig, however, said it has learned a lot from other launches, and it wants to apply those lessons to Kold.
“What we know in any launch is the product needs to meet the consumer need, and in this launch, the product needs to taste perfect,” Kelley said. “The consumer has to experience the fresh beverage in the home and that’s what we deliver. That, to us, is the most important piece.”
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