Keurig Green Mountain (NASDAQ:GMCR) disrupted the home and workplace coffee markets when it introduced its single-portion K-Cup packs in the late 1990s.
Before the K-Cup, people brewed pots of coffee in their homes or at the office. There were alternatives -- smaller coffee makers, brewing less than a whole pot, and even dreadful cups of instant coffee -- but there was no easy way to make one single cup after another of different types of java. Keurig changed that.
Today, the idea of brewing a full pot of coffee is a quaint antiquity. The K-Cup has become such a standard that all the major coffee chains, including Dunkin' Donuts, Starbucks, and Krispy Kreme sell licensed single-serving pods. Even McDonald's has a line of K-Cups, as does nearly every major coffee brand.
It has been a huge business for Keurig that has transformed how Americans drink coffee, but the man who invented the technology is speaking out against it, which could create problems for the company.
An inventor scorned
John Sylvan invented the K-Cup in the early 1990s and sold his share of the company for $50,000 in 1997, a move he told The Atlantic he has "some regrets" about. Since Keurig had over $3.6 billion in portion pack sales in 2014 (mostly K-Cups but some for its other brewers), it is hard to imagine those regrets do not occasionally run deep, and it is impossible to not at least wonder whether they impact Sylvan's feelings towards his creation.
"I feel bad sometimes that I ever did it," Sylvan told the magazine. "It's like a cigarette for coffee, a single-serve delivery mechanism for an addictive substance."
The disdain for his creation goes beyond his dislike of fueling coffee habits, and that is where problems might lay for Keurig. Sylvan is concerned by the huge amount of waste generated by K-Cups and does not believe the company will reach its stated goal of having all K-Cups be recyclable by 2020.
"No matter what they say about recycling, those things will never be recyclable," Sylvan told the magazine. "The plastic is a specialized plastic made of four different layers."
While portion pack sales have steadily grown from $2.7 billion in 2012 to $3.18 billion in 2013 and $3.6 billion in 2014, the environmental backlash has been building. The hashtag #KillTheKCup has been pushed by KillTheKCup.org, an environmental organization that aims to eliminate what it sees as the unnecessary waste created by the coffee pods. The group cites a number of statistics that were also used in The Atlantic article on Sylvan.
- In 2013, Keurig Green Mountain produced enough coffee pods to wrap around the equator 10.5 times.
- The new Keurig 2.0 does not offer reusable filters, and the existing "my K-Cup" filter does not fit on the machine.
- Keurig Green Mountain only makes 5% of its current cups out of recyclable plastic.
- The pods are made of No. 7 plastic, which can't be recycled in most places. They have an aluminum lid, which is hard to separate from the cup. Even if the plastic, aluminum, and coffee could be separated, the pod is too small to be handled by most recycling systems.
Keurig does not specifically say how many K-Cups it makes in a year, but it acknowledges the environmental concerns by issuing a yearly sustainability report. The company clearly is concerned about its impact on the world (or, more cynically, how that impact is perceived) and has a target to offset the water volume used to create its beverages by 2020.
"For every cup our consumers brew, we will restore the same amount of water for natural and community uses through projects in North America," the fiscal 2014 report reads.
The company also made a very clear promise on K-Cup recycling:
"A top sustainability priority for us remains ensuring that 100% of our K-Cup packs are recyclable by 2020," according to the report. "We know that consumers want a useful secondary life for their used K-Cup packs, and we are committed to solving this challenge."
The report points out that in fiscal 2014, Keurig "spent almost 6% of pre-tax income on social and environmental programs and investments."
People love their coffee
While environmental backlashes have produced changes like the elimination of styrofoam containers at McDonald's and limited use of styrofoam coffee cups, people still eat Big Macs. Keurig is taking a risk by setting its environmental goals for 2020, but the company deserves credit for addressing the issue.
Sylvan might not be a fan of the device, telling The Atlantic, "I don't have one. They're kind of expensive to use." But it is hard to picture the anti K-Cup movement gaining much traction when the company has agreed to fix the problem, albeit not in the immediate future.
Keurig has changed how people drink coffee at home and in the workplace. That change is unlikely to be reversed.
Daniel Kline has no position in any stocks mentioned. He drinks a lot of coffee made on his office Keurig machine. The Motley Fool recommends Keurig Green Mountain, McDonald's, and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.