When Keurig fights “coffee pirates,” who loses? Loyal consumers: Chris MacDonald

Ethical companies—smart companies—don’t pull the rug out from under their best customers

Starbucks original K-Cup pods for the Keurig 1.0 single-serve brewing system

(Chris MacDonald)

As you may have heard, Keurig is engaged in a battle with a host of companies that aspire to provide consumers with ‘pirate’ coffee pods. And who is losing this battle? The consumer.

For those of you who aren’t familiar with it, Keurig’s business model is pretty much the same as the business model used by most producers of desktop printers. Desktop printers have become almost trivially cheap — you can buy a laser printer for under a hundred bucks now — but the cartridges cost a bundle. That’s where they make their money. Likewise, Keurig sells its popular single-cup coffee makers at astonishingly reasonable prices, and makes its money on the coffee pods. Naturally, given that the pods are lucrative and easy to make, there have been imitators. A large number of companies have sold, over the last few years, their own “K-cups,” pods of coffee designed specifically to work in Keurig’s machines. Consumers love this, both because competition lowers prices and because it expands the range of roasts and flavours available.

MORE: The next generation of Keurig single-serve brewers will DRM-lock your coffee »

To fight the onslaught of packagers of (perfectly legal) pirate K-cups, Keurig recently starting selling its “Keurig 2.0” line of coffee makers. The 2.0 machines incorporate a digital rights management (DRM) system, designed to ensure that Keurig machines work only with Keurig branded and Keurig licensed pods, effectively shutting out the competition, at least temporarily. The result is that all those non-licensed Keurig imitators won’t work in the new 2.0 machines.

The result has included a $600 million lawsuit, along with some professional and some amateur attempts to break Keurig’s DRM.

Who ultimately loses in this fight? Arguably the consumer. Not only has choice been restricted, but there’s also an enormous information gap. Keurig has done a less than stellar job—I’m being charitable, here—of informing consumers about their new DRM system. The result has been frustration, both with the newly-limited choice of pods, but also with coffee machines that don’t work as expected.

Take me for example. My beloved Keurig died a couple of weeks ago. Its high-pressure water pump moaned and groaned and finally gave up the ghost. So I promptly bought a shiny new Keurig 2.0 (with a number of fancy new features) at Costco. Nowhere on the packaging did Keurig inform me that most of the dozen or so boxes of coffee and tea currently in my basement (well over $100 worth) simply will not work in the new machine. And it’s not just “pirate” pods that won’t work; nor will older Keurig-licensed K-cups—ones that bear the Keurig logo but that don’t have have the DRM-ready labels that the new machines require. Those are essentially garbage now.

MORE: Why Keurig’s locked-down K-Cups won’t prevent competition from generic coffee-pods »

A call to Keurig resulted in an offer of three gift certificates, each good for a box of pods (worth $12 or so). But that doesn’t come anywhere close to covering what I’ve lost, never mind the frustration.

And it’s not just Keurig itself. Retailers have been complicit in this abuse of customers. Many of them still stock the “pirate” pods, as well as older Keurig-licensed pods. In some cases (and Canadian Tire for example is guilty of this), they do this while aggressively selling the 2.0 machines, without any hint to the consumer of what the problem is.

The battle of the K-cups is about a bunch of things: intellectual property, competition, and innovation for starters. The back-and-forth of those things is pretty much standard fare in a thriving market economy. But ethical businesses—not to mention smart businesses—need to work harder to stay true to their goal of providing good value to their customers.

Chris MacDonald is director of the Jim Pattison Ethical Leadership Program at the Ted Rogers School of Management, and founding co-editor of the Business Ethics Journal Review.

34 comments on “When Keurig fights “coffee pirates,” who loses? Loyal consumers: Chris MacDonald

  1. Wow, what morons. In the words of Dave Moss, in a year, we’ll be saying, “They killed the goose.”

    I just cannot believe how incredibly moronic this is.

  2. Meanwhile, the 5 year-old French press I bought for $20 still works as well as the day I bought it. And since I grind my own beans, it pretty much always will. Makes you think twice about investing in “one-of-a-kind” designs like the Keurig.

    • apples to oranges. They aren’t going after the same market that you are in. The average Keurig owner probably doesn’t know what a French press is let alone how to use one. Still doesn’t change the fact that this is kind of a nasty tactic. I hope it hurts their market share in the single serve brewing industry. IMO Nespresso is far better anyway and they have huge share in Europe where coffee is notably better than in North America.

      • OMG you are so right.. My family being ghetto and into simplicity had either instant coffee or French Press when I grew up. Coffee makers needed too much maintenance my mom wasn’t going to put up with, mainly the descaling. Flash forward today where coffee is either already bought made, a standard work coffee pot, or Keurig. The French Press brought into work by my cousin was like some new magical way to make coffee to my under 30 coworkers!

        I knew about the 2.0 changes but didn’t realize even the older official pods was affected which blows hard.

  3. “Keurig sells its popular single-cup coffee makers at astonishingly reasonable prices.”
    Got a laugh out of this part. What’s reasonable about a $100 single-cup coffee maker? That for the most basic model they offer, too.
    Have to admit, I’ve enjoyed the convenience these machines offer when I’ve used them in the past, and had intended on buying one at some point. This new “DRM” system, though, has made me decide to stick to my old-school drip coffee maker. Thanks, Keurig, for saving me the $100+ I was going to be giving you!

    • My reaction exactly. Considering how simple the machines are they are hardly “astonishingly reasonable.”

    • I’ve been on the fence for several years now as my brother and parents converted ……. the mediocre coffee was overruled by the convenience it provided (unless you’re entertaining and some guests have a half hour wait for coffee ….and you spend $30 providing it to them). Thanks to this article Keurig, nor any other brand, will get me hooked. Glad I stayed out this long because frankly I would never have imagined the marketing sleaze that has come forth. Must be some of those ex-Microsoft Vista exec’s …… or, some of those old “New Coke” formula guys …….or ……….

  4. It seems pretty straightforward to me. If you want to use older k cups then continue to use the various older machines that remain available on the market. If you want the new technology and its advantages then get the new machine. Dont upgrade until you use up all your existing stock or sell it. 2.0 technology reads the label to set the brewing conditions for each cup. If pirates aren’t designing their pods to deliver that level of customization then Keurig has every right to exclude them. They can still sell their offerings to their existing market.

    • Calling them pirates is already ridiculous. This would be similar to a freezer scanning for compatible brands and not freezing if a competitor’s brand was present. DRM is a virus.

    • Hey Glenen, do you guys use Keurig machines at the Keurig office?

    • This has been brought to you by Keurig’s marketing department.

  5. You can get around the compatible cup issue by simplifying placing the foil of an approved cup over the unapproved cup.

    • It’s not simple, very hard to line up correctly,, takes forever the cut off, defilter, file down, not worth all the time wasted from this hack

  6. And now you know how every person feels that bought a video game that has DRM and has been somehow screwed out of a purchase. Only its not $8 worth of coffee pods but $60 for a game.

  7. Return the Keurig. Let the retailer know why you’re returning it. Make sure Keurig gets the message that this nonsense is costing them sales.

  8. If you take the lid off of a new Keurig pod,(that came with the new machine) and tape it underneath where the reader is, voila!

  9. $100-$180 for a coffee maker is not “astonishingly reasonable.” It’s not even “fairly reasonable.” The term you are looking for is “exorbitant.”

    Frankly, I can’t see why these thing haven’t ended up on the clearance table two Christmases ago. Some people are just plain lazy and have money to burn.

  10. How much more technology can a Keurig have? This will prompt Keurig 1.0’ers to simply refurbish them. It is not just a matter of the consumer at the grocery store. Think about businesses, like coffee shops. There are companies that give coffee machines to coffee shops for free, on the premise they will buy the coffee from them. Weeks pass with no orders because people are undercutting the machine provider with low ball prices. In this case, if you have their machine, you better be buying the product from them. It is no different than a franchisee needing more supplies for their store.

    Pretty soon you will be hitting a button on your toothpaste container so that it will empty in 10 days. Look at your razor blades! 3 uses and then they are done….But they have 4 blades! Look at your car, there is styrofoam in your bumper now! Companies only want us to live according to the product lifecycle that makes them richer. It is not about what is available today….it is about taking us backward so that we consume more. Shame on Keurig for this scam.

  11. Yet another reason for me to stop using my Keurig. My machine was given to me as a gift, and while I like the convenience, I don’t like the environmental impact of the disposable cups, and now I despise this tactic to make the cups proprietary. I’ve gone from mildly embarrassed to say I use a Keurig, to ethically opposed to supporting such a bullying company. Time to buy the French press.

  12. So I take it the eco reusable cups won’t work either?

  13. Simply cut the lid off one of the approved k-cups and place it over the unapproved k-cups and the 2.0 will brew your coffee. the lids can be used multiple times this way.

  14. Then only reason I would have bought a Keurig over a Tassimo is because I would want to us the reusable pod since these things are waste-making machines. Now I guess I

  15. Return your horrible new device to the store for a refund. The only incentive to change is money, so demand yours back. Buy a Nespresso machine instead.

  16. It’s not an issue. I just won’t buy the new coffee pot. Good job, keurig.

  17. my vue I had purchased through groupon goods stopped brewing after two short months. Keurig offered me the brand new model, bamboozling me into thinking they were a great company. They had me send the brew head into the recycling center. After receiving the deceiving 2.0 and battling the rep about the pods, I realized I could have repaired the view myself. Unfortunately the brew head they had me send to them in order to get the model, is a non replaceable part. I’m in the same boat as so many wronged customers. I have a broken vue that’s now missing a brew head, and many pods that won’t fit my 2.0. I’m at a crossroads. While loving the convenience of the keurig, I really feel this company has no ethics. It’s hard to stand behind that. I’d honestly rather boil water and do the pour through method than support these jerks.

  18. Well I had the other and disliked the small and limited coffee choice. I respected Keurig for not be a greedy cash cow and allowing me choice … Now not so much when my Keurig dyes I shall pickup whatever the next best thing is … Until than I will only buy unlicensed cups to support the injustice to the consumer … Too bad because I enjoy the convenience of an extra cup but as a tax paying hard working gal am extremely bored of making companies such as this richer !

    • My 92 year old father LOVES Dunkin Doughnut ceffoe . He just recently stopped driving . What he misses the most his DUNKIN DOUGHNUT morning ceffoe. This would be perfect .

  19. Return the 2.0 machine for a refund.
    Buy an older machine, or, buy a regular coffee machine, and cut open your stash of k-cups into it.

  20. About the only thing I agree with in this article is that the older Keurig pods should be redeemed since they do not work in the new 2.0 machines. A better public awareness campaign should have been undertaken by the company. Otherwise, they make money off of their coffee pods. Letting other companies “pirate” their pods infringes on their ability to make profit. Keurig is right to do so, they are protecting their survival. If you don’t like it, return your Keurig to Canadian Tire and keep your French press. This article sounds like sour grapes to me.

  21. Oh no! I can’t make it and I am so sad! I really want to go although the girls are throwing me a planning away party that night at Angie’s. And that i need so much clothes for my new job. So bummed. In any case, possess a blast and i would go with the dress its fab! XOXO


  22. I guess you weren’t loud enough when you called them. When I got my 2.0 and called Keurig to complain that my existing KCups (and my Vue Cups) wouldn’t work, they replaced all of my boxes that I had in storage – Which was about 8 boxes. I couldn’t be happier with my 2.0. Do I wish it had as my options as my Vue did, sure. Is it better than a standard 1.0 definitely.