Keurig’s K-Cup screw-up and how it K-pitulated Wednesday to angry consumers

By Fred Barbash May 7 at 3:23 AM Follow @fbarbash

It’s been called the “razor blade business model.” A company sells a product like a battery-operated razor blade handle at a relatively low price in order to sell a complementary consumable product later, like the astoundingly costly Gillette Power Fusion Proglide cartridge, $18 for four blades, which then get thrown away.

But it could also be called the Keurig “K-Cup” business model. Once a consumer buys the coffee machine, the coffee drinker may spend as much as $50 to $60 per pound on the coffee contained in the K-Cups, considerably more than the cost of even Starbucks’s breakfast blend, which goes for about $11.95 per pound.

Some years back, thousands of Keurig single-serve machine fans found a cheaper alternative, however — refillable, non-disposable K-cups, little plastic coffee grounds holders, which the company graciously sold under the brand of “My K-Cup.”

Not only was it cheaper, but the coffee drinker had more choice, as “My K-Cup” could be filled with any brand of coffee off the shelf.

But in August 2014, when Keurig introduced its “2.0” line of coffeemakers, it stopped making “My K-Cup” for it and made the machine incompatible with any K-cups already in existence, as well as with any unlicensed disposable K-cups made by other companies.

It was $50 a pound and a trail of waste — or nothing.

[K-cups inventor: ‘I feel bad sometimes that I ever did it’]

That was two provocations, but two too much. The reaction was fast and furious, on sites such as Amazon, as well as on Keurig’s own social media sites.

Rhonda Ungericht, among many others, vented on Keurig’s Facebook page:

“My sister bought a new Keurig and did not know it only takes Keurig K-cups until her third call to Keurig. Now my brother-in-law cannot use the coffee I got him for Christmas. I bought him Jamaican Blue Mountain coffee which you do not carry. And I have the original Keurig but when it dies, I will never buy another Keurig product. This borders on the unethical forcing people to buy only the K-cups you make. And you owe me $50 for the coffee!”

Keurig’s explanation was a model of what not to tell angry consumers. The company said the change was for the consumer’s own good.

“The My K-Cup accessory and other reusable filters are not compatible with Keurig 2.0 Brewing Technology,” the company explained on Facebook, “because the brewer has no way of determining what beverage is being used or how much coffee is being added, and therefore cannot adjust to factors such as brew strength and amount of water, which could represent a safety concern…”

[VIDEO: Coffee in America, by the numbers]

Clever competitors moved quickly to fill the void, with ways to, in effect, hack into the Keurig technology. The Rogers Family Company’s “Freedom Clip” was sold patriotically as “Our Gift To You and Everyone …. Freedom Of Choice!”

“We at Rogers Family Company® believe that your right to choose any option is imperative. That’s why we have developed this easily installed ‘Freedom Clip’ for Keurig 2.0® brewers. Just place the clip in your new brewer and it will see all k-cup type pods as ‘Authorized K-Cups®.’ This clip is our gift to you. Now go forth and brew with freedom.”

Worse for Keurig, as executives acknowledged Wednesday during its quarterly earnings briefing, sales of Keurig machines tanked and they began to accumulate on the shelves across the country. Sales of brewers and accessories declined by 23 percent, the company reported. Its stock price fell 10 percent in after hours trading.

With that, Keurig’s CEO did what he had to do. He capitulated Wednesday in a call with market analysts.

“We heard loud and clear from consumers,” said Brian Kelley, “who really wanted the My K-Cup back. We want consumers to be able to bring any brand and bringing the My Cup back allows that.

“My K-Cup was a terrific addition for the consumer. It wasn’t used a lot, but for the consumer it was a nice element to have if they were given coffee as a gift. . . . We took it away because My K-Cup” wasn’t going to work with our new system.

“Quite honestly, we were wrong. We underestimated the passion the consumer had for this. We missed it. We shouldn’t have taken it away. We’re bringing it back.”