Topics: Coffee, Coffee preparation, Starbucks Pages: 28 (9235 words) Published: February 7, 2012
REV : JUNE 9 , 2 0 0 4

Professor Paul W. Marshall and Research Associate Jeremy B. Dann prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 1999 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. PAUL W. MARSHALL

Nick Lazaris waited patiently at the stoplight, knowing he had plenty of time to make the early meeting at his Wakefield, MA office. This morning, Lazaris—President and CEO of Keurig, Inc.— would bring his top management team (Exhibit 1) up to date on problems developing in the company’s relationships with two critical vendors. The problems had already caused delays in the full roll-out of Keurig’s revolutionary coffee brewing system. Whenever he wondered if the term “revolutionary” was a bit too strong to describe his company’s products (Exhibits 2 and 3), he usually found quick re-affirmation of the potential impact the new system—which according to the company’s slogan could produce “coffee house taste by the cup.” Lazaris grinned when he saw the driver of the car next to his fumbling with a biscotti and a large cup of coffee from Starbucks while talking on a cellular phone. He liked to bring up anecdotes such as this to illustrate the vast potential he foresaw for his company. “Ten years ago, that guy would have had one cup from his Mr. Coffee at home and then another from the office coffee pot when he got to work,” said Lazaris. “Now, he goes out of his way to spend a couple of bucks each morning—on something that he used to get for just a few cents, mind you.” Keurig sought to ride the wave created by Starbucks and capitalize on America’s growing love for premium coffee. It was Spring of 1998, just over a year since Lazaris had assumed the role of President and CEO at the now six-year-old company. When he was hired in early 1997 by the venture capitalist who headed Keurig’s board, he inherited a company that had missed several internally generated deadlines for completing key aspects of its strategic plan. Keurig had segmented America’s $15 billion market for coffee and associated products into three main segments. The firm was already behind schedule in launching its two-pronged campaign into the commercial segments: office coffee services and food-service establishments. Eventually Keurig hoped to launch a version of its product to cater to the third market segment, the consumer market. Since most coffee was consumed at home, the market was very tempting, but the company wanted to make sure it established a strong brand and product reputation before tackling the complex consumer market. The home version of the Keurig brewing system was still probably three years away.

Lazaris and his management team knew they had only a limited number of chances to win over office coffee system distributors, major food retailing establishments, top-tier coffee roasting companies and other industry collaborators whose “buy-in” would be essential in rolling out Keurig’s unique product. As he pulled into the parking lot at his office, Lazaris’ mind was swimming

899-180 Keurig
with all of the issues he would be dealing with that day and in coming weeks. “It’s too early in the morning to think about this stuff,” he mused. “I need a cup of coffee.” The Founding of Keurig,...
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