Driving Sales Through Competitive Advantages
On this episode:
Conor and Alex chat with Chris Stevens, the man behind Keurig's monumental rise in the at-home, instant coffee industry. Chris discusses the marketing and sales strategies he employed, the importance of competitive advantages, and management of rapid growth in the beginning of the company's history. Listen until the end to also hear Chris' advice on giving back in your communities, and making long-lasting impacts.
Interview Recap
“Entrepreneurship is about acting on the obvious. (2:45)”
5 Quick Bites
Reading recommendations: Winners Dream by Bill McDermott, The Culture Code by Daniel Coyle, Fighting to Give by Chris Stevens (Yes - Chris wrote his own book!)
Skill or topic you’re interested in developing? Currently, Chris is focused on sharing the knowledge he’s compiled over the years and giving back to the community
How do you stay up to date with the latest developments in your industry? Being active in the companies Chris is involved with
Favorite CEO? Nick Lazaris, former CEO of Keurig
What (other) industry would you have started a company in? Beer
How did Keurig start?
Picture this: It’s MLK day in 1998. Chris is driving up to corporate offices in a truck filled with 12 Keurig brewers and 40 cases of K-Cups in NYC. His goal? Introducing the coffeehouse experience into the office, “one cup at a time.”
The coffee market during the turn of the century was dominated by big names - Dunkin, Starbucks - so Chris and his buddies decided to develop a delivery system for those big names instead of creating their own roastery.
Their first target? Offices. Their rationale was that once everyone at the office got to try Keurig, they would buy one for their home.
How did you develop partnerships with coffee roasters and incentivize them to work with you?
Keurig’s selling points to roasteries were:
The growing trend in the single-serve coffee cup.
Freshness. When coffee is exposed to oxygen, it deteriorates and goes stale. However, with K-Cup technology, the coffee stays fresh so every cup tastes like it’s straight from the roastery.
Helping regional roasteries develop a national presence.
One of Keurig’s earliest partners was Green Mountain Coffee Roasters. They then partnered with roasters from California, Toronto, Montreal, Minnesota.
How did Keurig grow into the successful business it is today?
Chris and his buddies understood that Keurig was not a coffee company. It was a tech company focused on the coffee industry. They developed tons of patents, which protected their brand and allowed them to grow. As Jack Welch (former CEO of GE) once said, “If you don’t have a competitive advantage, don’t compete.”
Chris was really good at explaining to investors that Keurig was a long-term investment (similar to Amazon’s growth). In fact, they didn’t make a profit until 2005!
Keurig also made nice margins on royalties (paid from roasteries to use their name on K-Cups.)
What is Keurig’s sales strategy?
The razor and blades/recurring revenue stream model. Basically, the purchase of K-Cups is a recurring source of revenue that pairs with the premium one-time purchase of a Keurig machine.
Any advice for entrepreneurs and tips for pitching yourself?
Chris believes that you should only invest in what you’re willing to sell yourself. From an investor POV, he looks for these 5 things:
Define the product/service in less than 10 seconds.
Who is the customer? How do they buy your product?
What is your competitive advantage? (bonus points for intellectual property, copyright)
What’s your why? What’s your cause?
Where’s it gonna be in 5 years?
How does Keurig demonstrate their “why?”
5% of profits go to corporate social responsibility initiatives, such as helping coffee farmers around the world grow non-coffee crops during the off season.
Every employee gets 52 hours of paid time to volunteer in their community.
100% of carbon footprints are offset.
Can you describe Keurig’s exit to Green Mountain Coffee in 2006?
Keurig & Green Mountain Coffee formed a strong relationship since they both shared the same value. In fact, after Green Mountain purchased Keurig, they let Keurig do its own thing and partner with other big names like Starbucks for their K-Cups. Green Mountain made the right decision, because later on, they sold Keurig to a German company for a whopping $13.9 billion!
Remember, “A great manager doesn't build the business; a great manager builds the organization for it is the organization that builds the business."
Fun fact: Ever heard of Tassimo? We bet you haven’t - this was Kraft Food’s (unsuccessful) version of Keurig. Keurig actually sued Kraft for copyright infringement in 2007 and won!