How Keurig sells not 1 but 6 millions machines per year

by chee Leng (on coffee makers)

Starbucks k-cups

Starbucks k-cups

Keurig is a popular coffee machine brand, the biggest in US and with their partnership to Starbucks, they are going to grow bigger. So, how big?

We can see Keurig confidence level and the amount of sales that they projected by the number of machines that they are making.

The manufacturer is in Malaysia, V.S. Industry Bhd., their boss Mr Gan Sem Yam recently reported that Keurig would add 20-30% to their overall group sales.

And they would be producing 3 million units of Keurig coffee machine per year for the next two year, and subsequently 6 million units per year.

That means Keurig expect sales of 3 million units. I am sure they would earn some money from the machines but the income generator are from the beverages.

At 3 million unit, even if per machine owner buys $100 worth of beverages, that would be $300 million worth of beverages and we all know that folks that owns coffee machines buy more than (per month!).

Keurig (GMCR) has some boo-boo with their stock prices last couple of weeks, with folks saying that they are over-priced and stuff.

But, if they can really move 3 machines per year or more, personally I don't think they are over-priced. US has about 300 million population, at 3 million, Keurig is selling to 1 percent of the population and I think that is a huge number!

My $0.02

The machines while said to be shipped to North America might be geared towards worldwide. With a 6 million units projection, Keurig might be gearing for worldwide growth.

And to have their manufacturing based in Malaysia has strategic implications.

I would imagine that if they have it in China, the image tagged to a "made in china" product is lower. Malaysia manufacturing is pretty high standard.

But, the most important thing is its geographical location, it is near to Singapore. Enjoying free trade agreement with many countries and being free market, shipping out from Singapore, allows keurig to enter many countries.

Moreover, the development of Singapore and the diverse taste profile meant that is a best area to test any marketing campaign.

I might be wrong, but Singapore might prove to be the launch pad for keurig into Asia.

They have been in Japan for a number of years without much stellar results, they have partnered with UCC for more than a decade.

Even if they would want to enter china, Singapore close working relationship with China make it very easy.

All that being said, keurig other launching out on its own, also have a silver bullet -Starbucks. Wherever, Starbucks launched its Starbucks k-cups, Keurig coffee machine would follow.

And that might also be the reason why they are projecting 6 million units!

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