The average American household consumes about 21 beverages a day, according to Keurig Green Mountain, and most of those drinks are cold. Now Keurig wants to convince consumers to pay $370 on a machine to craft their own sodas and other cool beverages at home.
The costly device from the company known for its pod-based coffeemakers is called the Keurig Kold. Online orders start on Tuesday and the device will be sold in several major U.S. Cities including New York, Chicago, and Dallas this October. The device makes branded products from Coca-Cola (KO) and Dr Pepper (DPS), as well as flavored seltzers and waters, sports hydration drinks, and iced teas.
Keurig (GMCR) CEO Brian Kelley says the device is a response to consumers’ desire to have a bigger hand in the creation of their favorite beverages and foods.
“What [consumers] say is, ‘I’m crafting my own beverage. It’s personalized. I’m empowered. It’s fresh,” Kelley told Coins2Day at an event debuting the Keurig Kold in New York City’s trendy Chelsea neighborhood. “They want a role in the process.”
Along with a hefty price tag, that empowerment comes with a lot of waiting around. Coins2Day tested the device and found it took 67 seconds to make an eight-ounce serving of Diet Coke, which was within Keurig’s estimated range. Opening a 12-ounce can of soda and pouring it into a glass only takes a few seconds.
Analysts are mostly worried about the price: Pablo Zuanic of Susquehanna International Group estimates that a 12-ounce serving of Coke will cost between $1.70 to $1.90 for the Keurig Kold. That’s far above the 25¢ to 35¢ cent range for a traditional can of Coke (depending on what size pack is purchased) and comparable SodaStream (SODA) drinks that cost between 60¢ and 65¢ a pop.
“The devices will gain little traction with those prices,” Zuanic says. Based on its own calculations, Coins2Day‘s sister publication, Money, is advising consumers to not buy the Kold.
Back in May, when Keurig presented details about the machine to the investment community, analysts bristled at its price and asked Keurig’s management team if there was a way for it to be more affordable.
But Keurig has maintained that even though the technology is costly today, as it ramps up production and the brand evolves over time, the price will come down. Though it won’t say by how much, some analysts are encouraged that the company is flexible on pricing. Back when Keurig introduced its coffeemakers in 2004, the machines cost close to $300. Its more affordable models now cost between $100 and $120.
The company could certainly use a hit. Sales for the first three quarters of the current fiscal year are down 1%, to $3.48 billion. And in the latest quarter, pod sales slipped 1%, but more problematically, brewer and accessory sales dropped 26%.
Keurig isn’t the only at-home device maker struggling these days. Sales at SodaStream, the competitor that the Keurig Kold is most often compared to, have slipped badly in the U.S. As consumers drink less sugary soda. With soda sales slipping for 10 straight years now, SodaStream is angling to focus more on low-calorie sparkling waters, new flavors that can be used as cocktail mixers, and other beverages outside the soda market. SodaStream’s U.S. Revenue tumbled 42% in the latest quarter, as it still tries to figure out its new mix.
At Keurig’s event Tuesday, Coke and Dr Pepper were prominently displayed in the marketing of the beverage pods used with the machines. Representatives from both companies attended the event.
But in a nod to the consumer-driven move away from mass brands to smaller, often local, competitors, Keurig also spent a lot of time talking about other beverage options, including lightly flavored waters, sodas made with pure cane sugar, soda fountain classics, and diet iced teas. Many of the brand names Keurig talked about on Monday – including Red Barn and Flynn’s Soda Shop – aren’t well known nationally today.
