The Price of K-Cup Convenience
CNBC Senior Stocks Commentator
Price war brewing for K-Cups? (One way to battle the price of $51 a pound!)
Those are among the eye-openers in this New York Times piece. A price war is inevitable — not because of the ridiculously high price of convenience, but because that's what happens when a product comes off patent, which Green Mountain's K-Cups do later this year.
It's no different than a drug going off patent! As a friend wrote the other day, at that point Green Mountain becomes a "contract manufacturer" of K-Cups. Contract manufacturers are the guys who assemble products (like PCs) for others at a low cost.
Think of it this way: When ANYBODY can make a K-Cup, existing Green Mountain customers will have an option, once their contracts expire, to have their K-Cups made cheaper elsewhere; they could even do it themselves. As I've previously reported, a number of companies have skirted the patents (and been sued for trying!) by making their own single-serve pods that fit a K-Cup machine.
Some consumers, meanwhile, buy reusable K-Cup filters for their own ground coffee (which kind of defeats the purpose!)
I believe K-Cups and the single-serve pod concept, for now, are well beyond the fad phase. They prove, for the most part, the average American consumer doesn't care about taste (I know — I use a K-Cup provided for free at CNBC every day!)
I have this hunch that at some point, maybe years from now, a new generation will discover the taste of freshly ground coffee making THAT the next big craze. Unless, of course, frozen/microwavable coffee is the next big thing! (Hmmm -- I'm calling my venture capitalist friends now!
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