The latest Hoover’s (2015) market research and analysis indicate the coffee and teas will propagate at an annual compounded rate of three percent. Keurig Green Mountain is the third largest manufacturer and distributor of coffee and coffee-related products behind both Starbucks and Nestle. A survey conducted by Oatman (2014) and the National Coffee Association confirmed thirteen percent of people drink a single-cup brewed coffee and accounts for $4.3 billion in sales. To capture further market share and to rebound from a disappointing 2015, Keurig Green Mountain is considering expanding their operations. These are significant undertakings and ones that come with enormous risks. This paper explores the risks and opportunities …show more content…
Keurig Green Mountain focuses on the consumer first in a competitive industry and avoids passing along price increases when possible. If they do this, the potential exists to affect operations and cash flow. There must be a balance between price sensitivity and distressing company performance. Disruptions in coffee supply to Keurig Green Mountain could prove detrimental and result in the loss of customers and strategic partners. They would see their inventories increase, a decrease in revenue, and fulfilling the growth strategy becomes …show more content…
When consumers perceive economic problems, products experience a sales slump including coffee. Restaurants and Hotels are the first to suffer because individuals eat out and travel less. A key customer of coffee products, restaurants are accountable for $700 billion in annual sales, according to the National Restaurant Association (2015 Restaurant Industry, n.d.). These numbers could have a significant impact upon the industry and impede growth. In economies where eating out is an indulgence, it might be prudent to delay any infrastructure enhancements. Luxury brands such as Keurig Green Mountain could suffer declining sales.
Alternative Financial Scenarios Keurig Green Mountain is proposing to construct a 500,000 square foot $18.5 million production and distribution plant in Ethiopia. They anticipate breaking ground in the fourth quarter of 2016 and will deploy a leadership team from their Vermont headquarter. Financial projections in Figure 4 show the inherent risks and their influence on the success or failure of the project. The only way Keurig Green Mountain recovers their investment is through growth with flexibility. Figure 5 articulates the benefits of expanding and if realized places Keurig Green Mountain on an encouraging path for long-term growth.