Introduction
Single-Cup Coffee: Profitability
In the world of sustainable businesses, some are turning to ‘green’ strategies only for profit, while some have been committed from the start. Green Mountain Coffee Roasters (GMCR), founded in 1981 in Westfield, quickly entered the specialty coffee segment, expanding rapidly across the country and starting with various mergers, most notably with Keurig and Dr. Pepper. Experiencing the challenges of fierce competition early on, GMCR used the opportunity to gain a competitive advantage by implementing sustainable production management and fair-trade practices. GMCR has had a reputation as an enterprise with its founder and senior management committed to protecting the environment, ensuring living wage payments for producing farmers, and conducting business transparently. Today, the company has been labeled as one of the most important beverage corporations in the world, competing with Pepsi Co, Starbucks, and the Coca-Cola Company.
GMCR’s entrepreneurial success arose from informing customers on the environmental impacts and social influences of their consumption. GMCR’s commitment to fair trade resulted in a lower cost of coffee compared to its competitors and provided great public relations exposure (Gittell et al., 2012). Subsequently, the company’s stock prices rose greatly between 2007 and 2010 due to revolutionizing industry practices and upholding sustainability (Gittell et al., 2012). However, what increased GMCR profits dramatically was introducing Keurig single-cup systems (K-Cups), contributing to 104% net sales growth between 2010 and 2011 (Gitell et al., 2012). Using the K-Cups brewing method allows making a cup of coffee quicker, saving one’s time. Hence, several companies soon exhibited an interest in purchasing Keurig brewers from GMCR, creating an additional income source for the business (Gitell et al., 2012). Lastly, GMCR adhered to the principle of keeping the retail prices low, thus gaining a further advantage over its competitors. Overall, the introduction of easy-to-use and affordable K-Cups contributed to the long-term success and increased profitability of GMCR.
Single-Cup Coffee: Sustainability
Such mass manufacturing of single-use packaged products quickly became the top concern of GMCR management, which set to evaluate the K-Cup system environmental impact. The GMCR then reported that K-Cup packaging only contributed to a minor proportion of their total environmental impact relative to other production stages (Gittell et al., 2012). Moreover, all the ingredients, flavors, and additives being pre-mixed were said to streamline the brewing process, arguably reducing further energy costs (Harris, 2021). Lastly, packaging for one cup helps to reduce product deterioration by avoiding air or light exposure, which makes the shelf-life longer. GMCR claims to uphold its ‘brewing for a better world’ values while simultaneously providing single-cup high-quality coffee.
However, concerns regarding single-use packaging remain in the coffee business. The single-use approach will most likely not be compatible with sustainability in the long run. The K-Cup components include a petroleum-based plastic pod, an inner paper filter, and aluminum foil overlaid with polyethylene (“How to recycle your K-Cup Pod”, 2021). The mixed components of organics and inorganics, as well as multiple layers, make recycling K-Cups a challenge, rendering the enterprise prone to environmentalists’ criticism. Hence, if GMCR continues to produce K-Cup with the polyethylene component, it may have to choose between its image as a sustainability-oriented company and its high profits.
The GMCR’s leadership position in sustainable business is driven by several factors. First, it imports Fair Trade Certified Organic Coffee directly from farmers to increase their income and improve quality of life (Gittell et al., 2012). Second, GMCR obliges to consider alternatives in producing coffee with environmentally friendly components, to recycle, and to support the Global Reporting Initiative (Gitelli et al., 2012). Lastly, it critically evaluates the entire production and distribution chain to identify all areas of potential improvement (“Brewing transformation”, 2016). However, with the increasing popularity of competitors like Starbucks, the company will likely have to invest heavily in the single-cup business to stay on top. Therefore, if GMCR were to maintain its leadership in sustainable business while expanding its single-cup production, it would have to radically rework its current cup design to make it truly recyclable.
Website Report
GMCR and the Vue System
In its attempts to reduce the environmental impact of K-Cup, GMCR has announced the launch of a new, ‘environmentally friendly brewing system.’ The new pod line is called Vue, with the K-Cups made of polypropylene, a type-five plastic that is recycled in approximately half of the American facilities (McKinney, 2013). Recently, GMCR has identified the possibility of removing the aluminum foil lid with the EASY-PEEL technology (“How to recycle your K-Cup Pod”, 2021). Thus, the pod can be recycled separately from the rest of the packaging. However, paper filters and aluminum foil cover still cannot be reprocessed, which undermines the sustainability value of using polypropylene. Overall, while GMCR undertook significant steps in implementing recyclable materials, much work remains to be done. Primarily, GMCR can be criticized for its lack of focus on reducing excessive packing before turning to recycle as an answer.
Another innovative approach was GMCR’s introduction of a multi-cup box set. The goal of this commitment was to reduce greenhouse gas emissions by 20% and to decrease the use of raw materials in production of packaging (Harris, 2021). GMCR also reworked the coffee-brewing machines sold for home use, adding an energy-saving option to automatically turn off (“Brewing transformation”, 2016). Finally, the enterprise now offers its customers a reusable filter assembly called My K-Cup off (“Brewing transformation”, 2016). All these actions show GMCR’s practical commitment to reducing environmental impacts. However, the company may still not be doing enough to address its most substantial environmental critique – the excessive use of practically non-recyclable single-use packaging.
GMCR and the Competition
The use of Keurig technology is no longer unique to GMCR. Its main competitor, Starbucks, sells single-cup brewers as well, and it is already clear that this would have negative impacts on GMCR’s business (Alam & Masoom, 2018). Moreover, with the expiration of the GMCR patent on K-Cup, more competitors will be able to market the same product, potentially pushing the corporation off its’ leading position in the market. To prevent this outcome, the company may revert to heavily relying on its sustainable business practices to gain a competitive advantage once again. One of such sustainability initiatives was the recent launch of the Vue product line.
Due to their diversity and recency, several GMCR patents will remain valid for a while, which will allow targeted marketing of the Vue line and re-licensing in the meantime. All the new GMCR brewing systems follow the Vue approach, currently giving it a competitive advantage. The company likely counts on sustainability to attract clients like before and improve profitability. Moreover, using recycled materials to make cups can reduce operating costs (Lutey & Rayome, 2020). Reusing the materials may be profitable for GMCR in the long run. In addition, more consumers, employees, and investors are considering engaging with businesses that run sustainable operations, giving them a competitive edge in the same market. Thereby, GMCR’s dependence on projects like Vue is already growing significantly and, perhaps, justifiably, given the growing interest in sustainable businesses.
However, commitment to sustainability and the single-cup segment of the coffee market are intuitively viewed as mutually exclusive. GMCR will likely be able to remain distinct in its sustainability efforts in the single-cup business. The extent of overlap between the target audience for purchasing organic and fair-trade coffee and those attracted by the convenience and low price of K-Cups is unclear. Meanwhile, this overlap will likely be what determines the future of GMCR survival in the coffee industry. There are some hopeful indicators of public interest, but no definite answer has been given. Thus, there is no guarantee that GMCR’s sustainability efforts will contribute to future profitability and stock price enough to keep the corporation in its leadership position.
Conclusion
GMCR uses solid sustainability ideas to run its business since today’s companies increasingly need to incorporate environmental priorities into their decision-making systems. By developing a novel sustainable solution for one cup of coffee with Vue, GMCR attempts to balance the demands of the single-use market with their usual position as an organic, fair-trade, green business. The Vue approach brings a few benefits to GMCR, which include a better product image, potential higher profitability, and higher stock prices. However, the enterprise may now arguably fall into the trap of being not sustainable enough for environmentalists and not cheap enough for a single-cup coffee business. Thus, while the Vue approach will not provide GMCR with a definite guarantee to success, it is nonetheless hopeful progress toward sustainable business goals.
References
Alam, L., & Masoom, M. R. (2018). ‘Green investing’ as an approach to make ‘Green Bangladesh’: The role of stock exchanges.American Journal of Trade and Policy, 5(3), 121-130. Web.
Brewing transformation: Sustainability at Keurig Green Mountain. (2016). Keurig Green Mountain. Web.
Gittell, R., Magnusson, M., & Merenda, M. (2012). The sustainable business case book. Internet resource. Web.
Harris, J. (2021). Social Movement Lessons from the Fair Trade Movement.Sentience Institute, 78. Web.
How to recycle your K-Cup pod with new easy-peel lid. (2021). Keurig. Web.
Lutey, M., & Rayome, D. (2020). Portfolio management of high-growth firms and technical buy points. The Journal of Applied Business and Economics, 22(4), 26-35. Web.
McKinney, L. (2013, September 7). Green Mountain Coffee Roasters, Inc. introduces smart technology to small office brewers with launch of Keurig® Vue® Brewing System with RFID technology. Business Wire. Web.