When the patent expired in September 2012, some analysts foretold doom.
That has not been the case. Rival companies have captured just about 8% of the single-serve market, and through the third quarter of this year, $2.4 billion of Green Mountain's $3.3 billion in revenue has come from selling the ubiquitous portion packs.
Green Mountain struck deals to make K-Cup packs for some of the biggest names in the business, including Starbucks and Dunkin' Donuts, and has kept that business after the patent expiration.
"The patent expired 13 months ago," said Bill Chappell, an analyst with SunTrust Robinson Humphrey in Atlanta. "We've had more than ample time to see what kind of impact it would have, and it really hasn't had that much."
That doesn't mean there aren't determined challengers out there, perhaps none more feisty than Rogers Family Co. in Lincoln, Calif.
Founder Jon Rogers remembers his first mug of K-Cup coffee, some 20 years ago at a car wash. He didn't like it and decided the single-cup craze would be a flash in the pan.
"I didn't think it had legs," he said. "Obviously time proved me wrong."
Rogers didn't wait for Green Mountain Coffee's patent to expire to launch his own single-serving portion pack, which led to his company being sued in November 2011. Green Mountain Coffee lost that lawsuit in May and appealed to the federal circuit, where the appeal is ongoing.
Rogers said he felt it was important to fight the much-larger Green Mountain Coffee because Rogers' One Cup portion pack is so different from the K-Cup pack. Rogers Family Co. has about $200 million in annual sales.
"Look at ours, and look at theirs," Rogers said. "They don't have a leg to stand on."
The One Cup uses a ring made from plant-based materials and an inner bag made from wo! od pulp, together with a mesh filter made from food-grade polyester. It is 97% biodegradable, says Rogers, who invested $10 million in machines to make the pods. Only the mesh filter is not biodegradable. Rogers is looking for an alternative that will make One Cup 100% biodegradable.
"It's done very well," Rogers says of One Cup. "It's pretty much nationwide, sold in selected Costcos. We manufacture (the) private label for Safeway."
One of the enduring criticisms of the K-Cup pack has been that it ends up in landfills — a problem that Green Mountain Coffee is still trying to solve.
Whole Foods Market, which launched a pod under its private 365 Everyday Value brand in July, did not even consider Green Mountain Coffee as a supplier, said Mark Dickerson, a buyer for the grocery chain.
Dickerson declined to say who makes Whole Foods' pods but did say the famously green company had to grapple with the fact that its consumers "tend to not like additional packaging."
As much as Whole Foods might chafe at the single-serve pod — which is difficult to recycle because of its small size and the combination of plastic and aluminum used in its packaging — the company decided it couldn't ignore the numbers.
"The sales trend really, really made it compelling to explore the opportunity," Dickerson said. "In doing so we wanted to stay true to our mission and core values and do it in a Fair Trade organic format to differentiate ourselves."
While the inroads that unlicensed portion packs have made so far are modest, Green Mountain Coffee's plans to introduce a brewer in 2014 that can reject unlicensed pods has some analysts wondering just how worried the company is.
CEO Brian Kelley explains that Keurig 2.0, as the new brewer is known, utilizes interactive technology to distinguish licensed from unlicensed pods.
"We will brew perfectly every licensed pod," Kelley said. "We're in the process of offering unlicensed pods the opportunity to come into the system so the! y, too, c! an be perfectly brewed."
Kelley declined to say what the fate of unlicensed pods will be in the new system, but it could range from not brewing them at all to brewing them a few times before they no longer work.
"It's fair to say we're still deciding on exactly how we will handle the unlicensed pod," Kelley said.
Dan D'Ambrosio also reports for the Burlington (Vt.) Free Press
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