Keurig says it was wrong to force users to buy single-serving pods

Coffee company Keurig Green Mountain offered something of a mea culpa on Wednesday night, when its CEO admitted that the company had been wrong to build its second-generation coffee makers with tech that prevented users from brewing their own coffee independent of Keurig's licensing. Keurig Green Mountain stock is currently down 9 percent.

Last year, Keurig drew the ire of the Internet by incorporating a scheme similar to the Digital Rights Management (DRM) you see on e-books and video games into its Keurig 2.0 coffee maker. The next-generation machine forced users to brew with Keurig-approved coffee pods exclusively, using a digital scanner that looks for an ink marker on authorized K-cups. The company also discontinued its “My K-Cup” reusable pod, which meant that customers could no longer use their own coffee in a Keurig.

The response was swift, and people soon discovered that a simple piece of tape covering the scanner would override the “Oops!” message that off-brand coffee pod-buying scoundrels received from the machine. One family-owned coffee company, the Rogers Family Company, even produced its own “Freedom Clip” that did the same thing as the tape but with a saucier name. Jim Rogers, the Rogers Family Company vice president, told Ars in February, “We decided to offer the Freedom Clip for free, because we found Keurig’s attempt to lock out other coffees offensive. We thought it would be fun to give the giant, Keurig, a little poke."

It turns out that lots of customers also found that attempt offensive and voted with their dollars. Although Keurig's total revenue was up 2 percent for the quarter, the company's sales of brewers and accessories were down 23 percent. While pod sales were up 14 percent, Keurig Chief Financial Officer Fran Rathke said that shipments of pods by volume were below the company's expectations due to a “somewhat higher than expected consumer price elasticity at retail.”

Keurig President and CEO Brian Kelley said that some of the slack was created by “consumer confusion around pod compatibility,” according to a transcript posted on Seeking Alpha. Kelley added that his company was rushing to incorporate formerly unlicensed pod brands so that the coffee makers would work with “more than 500 varieties across more than 70 brands” rather than just Keurig Green Mountain coffee.

Finally, Kelley said that Keurig would bring the My K-Cup reusable filter back to the “small but passionate” number of consumers who insisted on brewing their own coffee in a Keurig maker.

“I would tell you the other thing we heard loud and clear from the consumer, while a very small percent of consumers, a very vocal and intense, passionate consumer who really wanted the My K-cup back, what we learned is... that we want consumers to be able to brew every brand, any brand of coffee in their machine and bringing the My K-cup back allows that,” Kelley said on the call. “We took the My K-cup away and quite honestly we’re wrong.”

"We underestimated the passion that consumers had for this... We shouldn’t have taken it away, we did. We are bringing it back.” Kelley noted on the call that the My K-Cup filter will be available for Keurig 2.0 in time for the holidays.