Keurig Plummets After Slow Brewer Sales Eat Into Forecast

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Keurig Green Mountain Inc., the maker of single-serve coffee machines, tumbled the most in more than two years after cutting its annual forecast, hurt by slow sales of its second-generation brewing system.

The company now expects earnings per share to decline by a mid-single-digit percentage after factoring in a 14-cent impact from currency fluctuations. That compares with a previous prediction for a gain in the mid-single digits.

Sales volume for the company’s brewers declined 22 percent last quarter, underscoring the slow adoption of the new Keurig 2.0, which lets people brew a carafe of coffee at a time. Brewer inventory also is stacking up at retailers, Keurig said. Separately, the company named a new chief financial officer, Peter Leemputte, who will replace Fran Rathke in August.

Keurig had said in February that the Keurig 2.0 rollout was off to a slow start. Though customers were thought to be eager for a larger brewer, many were confused about what pods they could use in the new machines. Keurig’s original system popularized K-cup single-serve canisters, leading a variety of brands to offer coffees and teas in the format.

“These issues with 2.0 are a bit of a continuation of what we went through in the first quarter,” Chief Executive Officer Brian Kelley said in an interview. “There was consumer confusion, and while less, we still have some consumers who don’t believe it brews all the brands that it does.”

Stock Dives

Shares of Waterbury, Vermont-based Keurig plunged 9.2 percent to close at $98.16 in New York, the biggest one-day drop since September 2012. The stock has slipped 26 percent this year -- dragged down by concerns about the Keurig 2.0, as well as speculation that a new cold brewing system would be delayed.

The cold brewer, called Keurig Kold, will let customers make their own soda. The product thrusts the company into competition with SodaStream International Ltd. and others. Keurig’s big ally in the endeavor is Coca-Cola Co., which has invested in the brewing company. Coca-Cola CEO Muhtar Kent said last month that the cold system could take off even faster than its original hot machine.

Kelley said on Wednesday that the product isn’t behind schedule and has been expected this fall all along. The company is showing it to investors next week and will provide additional detail on timing then, he said. A key question is whether the product will on store shelves for the holiday shopping season.

“There has been no change in the date in terms of when we’re launching,” Kelley said. “There is not a delay.”

As Keurig copes with the current slump, it warned that sales will be flat or up in the low-single digits this year. That compares with an early forecast for a rise in the mid- to high-single digits.

“It will take us several quarters to work through this, and that’s reflected in the guidance,” Kelley said.


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