Keurig will begin advertising its new "Kold" home beverage-making machine this week with a campaign that promises "all your favorites, fresh made at the push of a button." But one of those favorites -- Coke -- gets more airtime than the others.
The soda brand's premium placement in the launch campaign is not surprising, considering Coca-Cola has a 16% stake in Keurig Green Mountain Inc. The two parties first joined forces in February 2014 when they announced a deal to collaborate on the development of Coca-Cola branded products for use in the system.
Nearly two years later, Kold is finally available for sale, potentially heralding a new do-it-yourself era in the beverage marketing wars. Coca-Cola's chief competitor, PepsiCo., recently expanded its relationship with Keurig rival SodaStream International, the Wall Street Journal recently reported.
Keurig has a separate deal to sell brands for Kold from Dr Pepper Snapple Group.
The machines will roll out slowly in what Keurig executives have described as a "disciplined, measured launch." The first units are expected to begin selling online on Tuesday, and by October, the machines will be sold in stores in six markets. Beverage Digest reported the cities would include Atlanta, Boston, Chicago, Dallas, Los Angeles and New York at retailers including Walmart, Target, Bed Bath & Beyond, Kohl's, Best Buy, BJ's Wholesale and Bloomingdale's.
The campaign is by Keurig's agency, Havas Worldwide, New York. Ads will launch online initially with TV spots to be added later in the targeted markets. One 15-second video (below) only plugs Coke products -- including regular Coke, Diet Coke and Coke Zero -- and states "now you can make a Coke at home."
Coke is also featured in a 30-second video (at top) along with Coca-Cola's Sprite brand. But the spot also includes some Dr
"It's a big deal and a big sign of confidence that Keurig is the machine that Coke chose," said Tim Maleeny, chief strategy officer at Havas. "So the balance for us from a communications standpoint is leveraging the benefit of, you can get anything you like, including Coke … but also play up variety at the same time."
The campaign was paid for and directed by Keurig, but the Coca-Cola team worked collaboratively with Keurig on the ads, especially on the use of the company's brands, according to a Coca-Cola spokeswoman.
The machines will carry a suggested price of between $299 and $369, according to a Keurig presentation to investment analysts in May. Kold units do not require a CO2 canister for carbonated beverages. Instead, the machines use so-called "carbonator beads." Beverages can be made within 60 seconds chilled to about 39 degrees, according to the presentation. Beverage pods come in 4-count boxes for an expected price of $0.99 to $1.29 per pod, according to the presentation. One serving is 8 ounces.
The highly anticipated launch comes at a critical time for Keurig, whose stock price has fallen amid disappointing sales. The company, known for its at-home pod brewing system, reported a net sales declined of 5% for the quarter ending June 27.
Last week, investment group CLSA lowered its outlook for the company, citing sluggish brewer demand. The firm also noted that "while total Keurig system K-Cup sales continue to grow strongly at retail, those of company-owned brands are in decline. This shift towards licensed brands is revenue dilutive as Keurig captures a smaller percentage of the retail price."
In Keurig's earnings statement, CEO Brian Kelley acknowledged the company was "not pleased with our revenue growth." But he added that "we continue to believe that our hot system has the potential to reach more than 50 million U.S. households over time -- more than double its size today. In addition, the upcoming launch of our Keurig Kold system creates an even larger opportunity for long-term growth and value creation."
