What Does Really Keurig Do/produce? What Is It Buying from Other Companies?

Question: What does really Keurig do/produce? What is it buying from other companies?

Answer: Keurig Inc, founded in Massachusetts in 1992, was a company that produced coffee brewers and coffee pods. The coffee pods were called K-Cups, and they were pre-measured coffee portion packs sealed with almost no oxygen content or moisture to preserve freshness and shelf life. It was a plastic cup consisting of three layers of plastic and a conical shaped filter paper that holds the coffee.   The Keurig coffee brewer was a compact countertop unit that brews the coffee from K-Cups in a 30 second process and maximizes the taste profile of each K-Cup variety. Initially, the products were introduced to the office market and the food services industry such as restaurants, convenience stores, etc, and then later a consumer version of the brewer was launched to target the consumer market.

Keurig was purchasing the packaging line, for the mass production of K-Cups by Green Mountain Coffee Roasters who had invested in Keurig and were in an arrangement with, from Manufacturing Technology Systems (MTS), a Boston Massachusetts based company. Keurig was also buying the coffee brewers from Vandelay Industries, a designer and manufacturer of precision oceanographic instrumentation based in Wellesley, Massachusetts.

Question: Are the relations with these other companies smooth and easy?

Answer: No, the relations with these other companies are not smooth and easy. Keurig went into a stressful situation with MTS just before they were scheduled to deliver the packaging line for the K-Cups. MTS demanded more money from Keurig than had been stated in the contract because apparently the cost was in excess of what was initially forecasted due to changes design modifications that Keurig had made during development. This led to a stressful relationship between the two. Keurig realized that MTS was using the packaging line as leverage, Eventually Keurig made a payment to MTS for immediate control of the machine. This situation led to Keurig considering other vendors for the next two packaging lines that they were going to purchase. MTS still had the upper hand as none of the other vendors would be able to provide the packaging lines within the required time frame as they would require time to engineer the machine, which MTS already had. MTS asked for a significantly higher price for the next machines which Keurig wanted to purchase, and Keurig had to assess the situation and make a decision. They had to either compromise with time, as the other companies would take a minimum of two months extra to deliver, or they had to compromise with the price, as MTS asked for a price significantly higher than that of the competitors. There was a possibility that this situation would have an effect during the next round of equity financing for Keurig, as it would affect the future of the company.