March 5, 2013
The Five main issues with Keurig is their supply chain/supply, technology, funding/financing, management, and the market. All of these are issue Keurig is facing as it tries to enter the marketplace. During the summer of 1998 Keurig’s senior management team was as follows. Nicholas Lazaris was President/CEO and also a Board member, Christopher Stevens was Vice President, Sales and Marketing, and Richard Sweeney was Vice President, Operations and Engineering. Keurig had a rough start but at the end of 1997 Keurig had its first partner. This partnership was with Green Mountain whereby Keurig would own the K-Cup packaging line at the Green Mountain facility and Keurig would earn back a licensing fee for each K-Cup produced.
In Early 1998, Lazaris received a phone call from Mike Moore, CEO of Manufacturing Technology Systems (MTS), the Boston based company that was the first to develop the packaging line for K-Cups. Moore informed Lazaris that the first packaging line was completed but wouldn’t be shipped until MTS received an additional $180,000 payment to the $700,000 already paid. MTS said this was because it cost way more than they expected due to the fact Keuirg had design modifications. After long deliberations Keurig paid MTS to take immediate control over the packaging line. Once this machine was installed at Green Mountain, they realized that they need two more lines to support the number of brewers they projected for the next eight months. When Lazaris approached MTS about the next order of two packaging lines, Moore finally quoted them at $700,000 each after selling the first for $550,000 plus the $180,000 and said the next order would be $900,000. Keurig management discussed its options if they were to not stay with MTS and they had a few choices.
One option was to go with Pilgrim, which was located in Boston, MA and was a large producer of specialized machinery, including packaging lines.