Keurig Courts Coffee Geeks With a Wi-Fi-Enabled Smart Brewer

(Bloomberg Businessweek) -- Since their debut in the late 1990s, Keurig coffee machines have built a mass following for their sturdy dependability. The functionality and design—think the no-frills cousin to Nestlé SA’s sleeker Nespresso range—speak to an era when coffee was chiefly thought of as a utility to rouse the sleepy.

These days, as more Americans come to revere a cup of coffee as something of an art form, Keurig Dr Pepper Inc. believes drinkers will pay a premium for an appliance that promises to perfect java down to its most minute details. Enter the Keurig Custom Smart, a $399 Wi-Fi-enabled capsule brewer seeking to gauge the U.S. thirst for connected caffeine when it begins selling in late October.

Set to be the company’s most expensive machine, the Custom Smart has software that can recognize every one of the more than 800 pod varieties Keurig manufactures, including those under license from the likes of Starbucks Inc. and Dunkin’ Brands Group Inc. It will then brew the contents of the pod to exact specifications: It knows, to the degree, what temperature the water should automatically be warmed or cooled to and the pace at which it then trickles through the grind and into the cup. Should a tech-forward gourmet believe she knows better than the master roaster, she can still remotely fine-tune thousands of permutations related to heat, speed, and strength through a mobile app.

“This is the future of coffee,” says Chief Executive Officer Bob Gamgort. “Keurig created the single-serve coffee category in the U.S., and now we’re paving the way for a connected and personalized brewing experience at home.”

For casual coffee drinkers perfectly content with unpretentious coffee, the pomp associated with such contraptions may well be a turnoff. But for Keurig Dr Pepper it represents a culmination of an image upgrade, from manufacturer of frumpy brewers to purveyor of connected household staples for the modern, latte-sipping aesthete. The strategy taps into the increased sophistication of consumers eager to set themselves apart from the faceless masses by choosing niche craft beer, slow-roast beans, and small-batch spirits, produced ethically and with an uplifting corporate story to tell.

The caffeine industry is undergoing profound change, with drinkers becoming more knowledgeable about the roasts they purchase and more committed to extracting the best possible pour. Global behemoths such as Nestlé have taken note. The Swiss food and beverage company bought Blue Bottle Coffee and Chameleon Cold-Brew in 2017 to push into premium java, and it’s elevated its Nespresso range into a consumer experience akin to shopping at a tony designer boutique.

The new Keurig, which costs about four times as much as a standard load-press-drink pod machine, is set to challenge Nestlé’s Vertuo line of big-cup coffee machines in the U.S. Nestlé introduced that device a few years ago after finding that few Americans drink the diminutive espresso that made the Nespresso brewer a hit. Conversely, the Keurig device doesn’t sell in Europe.

“We’ve always had competition in this space,” Nestlé CEO Mark Schneider says. “The in-home trend plays to our strength and away from others who are more out-of-home focused. It’s not that we’re exactly shaking in our boots.”

The capsule coffee machine segment of the $6 billion coffeemaker market, which Keurig dominates in the U.S. with a presence in more than 30 million households, is expected to be the fastest-growing because of their ease of use, according to an analysis by Grand View Research. But manufacturers of single-use pods have come under fire for their toll on the environment, with millions of plastic or aluminum capsules piling up in landfill every year. Along with industry peers, Keurig Dr Pepper’s taking steps to address that burden by committing $10 million over the next five years to improve recycling of polypropylene plastic in the U.S. By the end of this year, the company aims to make all its pods from recyclable polypropylene plastic. Although Keurig Custom Smart will initially be limited to a few thousand units, it marks the business’s first serious attempt to tap into the demand from those discerning drinkers for smarter brewers that can re-create a barista’s standards without any of the effort and from the comfort of the kitchen counter.

“Having better coffee at home has really moved up in terms of consumer priorities,” says Jeffrey Young, founder of Allegra Strategies, a consultancy focused on coffee. “Their relationship with coffee had always been kind of a functional one, and now it’s more of an experiential one, with a clean, stripped-back, minimalist approach where you deal with all of it on your phone.”

Two years after the merger of Keurig Green Mountain coffee dispensers and soft-drink giant Dr Pepper Snapple Group, the new machines mark the company’s most significant rollout under the roof of JAB Investors. That consolidation was spearheaded by Olivier Goudet, a Frenchman who in 2012 embarked on a seven-year takeover spree to consolidate the sprawling coffee industry.

In upgrading the roster of products by connecting more of them to the web, Gamgort also sees an opportunity to monetize the data the machines send back. Starting in 2017, Keurig Dr Pepper installed more than 10,000 connected brewers in American households on a one-way basis: Customers couldn’t yet customize their coffees from their phones, but whenever the machine would brew a cup, it would send a notification to the company in less than a minute of the drip detailing which pod had been used at which location at what settings.

Access to that real-time information, called “point-of-consumption” data, ranked Keurig Dr Pepper among the most proficient consumer-goods companies. When workers began cocooning at home earlier this year to help prevent contracting the novel coronavirus during their commute or at the office, Keurig Dr Pepper adjusted its supply chain and marketing priorities in line with the data it was receiving from the connected brewers.

“It served us remarkably well during the pandemic because we could see the surge in demand happening inside the homes well before it showed up in syndicated data or on order from a customer,” Gamgort says. “That’s just one example of being way ahead of the game in terms of daily demand.”

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