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Keurig reverses course on refillable K-Cup coffee pods after a fierce backlash

May 7, 2015, 6:30 PM UTC

Green Mountain Coffee Roasters

Photo: Herb Swanson/Bloomberg/Getty

Keurig Green Mountain (GMCR) will bring back its refillable My K-Cup coffee brewing pods in time for the holiday season, caving in to a ferocious backlash from customers who have balked at buying its pricey new brewers since they can’t make the coffee of their choice with those machines.

The company announced the decision on Wednesday during a conference call with analysts following the publication of financial results that showed an alarming 23% decline in sales of Keurig Brewers that forced it to lower its 2015 sales growth forecast. The poor numbers sent shares in Keurig Green Mountain, once one of Wall Street’s hottest stocks, tumbling.

Keurig Green Mountain clearly misread its customers’ attachment to the old pods, which were refillable and let customers brew the coffee grinds of their choosing. The newer 2.0 model only brews Keurig-branded coffee cups.

“We heard that loud and clear from the consumer,” CEO Brian Kelley told Wall Street analysts. “We want customers to be able to brew every brand, any brand of coffee in their machine, and bringing the My K-Cup back allows that,” he added, but conceded that the cohort of agitators on social media and elsewhere was “a very small percent” of customers.

The about-face by the company comes as Keurig 2.0 has been something of a bust so far, with many going unsold, collecting dust on store shelves. Sales have languished in the past two quarters due because of high prices of the 2.0 brewing system, poor initial reviews, and confusion among customers over whether the new machines could still brew non-Keurig brands.

The $200 machine, introduced last summer, allows users to brew up to 30 ounces of coffee at once using a K-Cup that’s about twice the size of its traditional coffee pods. But Keurig angered customers at the time when it opted not to make “My K-Cup” for the new brewer and made the Keurig 2.0 incompatible with any K-cups already in existence, as well as with any unlicensed disposable K-cups made by other companies.

“Our transition to 2.0 was particularly complex. Point of sales results were not as strong as anticipated, which led to higher levels of brewer inventory at retail and on our balance sheet,” Kelley said.

Mashable reported that new My K-Cup pods will have to be designed specifically for the Keurig 2.0 brewer, which has a different receptacle, meaning old My K-Cup pods won’t work in it.
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