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Maker of Keurig coffee brewer set to play defence

The patent for Green Mountain’s Keurig brewer and K-Cup portion packs expired last month, opening up the field to rivals.

Sylvain Toutant believes there's still a lot of perk left in Green Mountain Coffee Roasters Inc.'s Keurig coffee maker – the best-known brand for single-cup brewing – even as a bevy of rivals promise to take some of the jolt out of the no-longer-patent-protected system with their own versions.

The newly anointed president of Green Mountain's Canadian operations says he's not overly concerned about the fact that the patent for his company's Keurig brewer and K-Cup portion packs expired last month, opening up the field to the competition with their own lower-cost private label knockoffs.

"We were prepared for this, we knew the patent was going to come off at some point and we've factored in the private label element," Mr. Toutant said in one of his first interviews since his appointment last week.

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The K-Cup system remains the market leader and will continue to do so for some time, he said.

The corporate strategy is to move aggressively to defend the single-cup space while offering innovative new products such as a new chocolate-based beverage being introduced this fall, says Mr. Toutant, who replaces Gérard Geoffrion, recently tapped by Waterbury, Vt.-based Green Mountain to crack new markets outside North America.

Both Mr. Toutant and Mr. Geoffrion are former executives at Montreal-based coffee maker and coffeehouse chain Van Houtte Inc., which Green Mountain bought for about $900-million two years ago.

Prior to becoming president of Green Mountain's Canadian business – which includes the Timothy's chain – Mr. Toutant was chief operating officer of Green Mountain's Canadian unit.

He was also part of the team that designed and launched the well-regarded Réno-Dépôt Inc. home renovation chain, becoming its president and CEO in 2001.

He did a stint, as well, as the head of Quebec's liquor monopoly, Société des alcools du Québec.

"Our strategy in Canada isn't going to change. We have to keep on developing our company right across Canada," he said.

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That includes not only a broader mix of single-cup offerings for home and office but also more coffee house openings, says the 49-year-old executive.

It also means the introduction in Canada later this year, or in the new year, of Green Mountain's latest patent-protected machine: Vue.

That should help in protecting market share in both the United States and Canada, Mr. Toutant says.

Among companies that have said they plan to produce their own versions of the K-Cup is Kraft Foods Inc.; it will do so under the Maxwell House and Gevalia brand names.

Meanwhile, Wal-Mart Stores Inc. has since mid-October been selling the low-priced Esio Beverage machine that makes both hot and cold drinks using multi-serve packs.

Other chains, notably Costco Wholesale Corp., Kroger Co. and Safeway Inc., are also entering the market with their own private-label brands.

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Just for good measure, global giant Nestlé SA is now marketing its Nespresso pods in the United States after conquering Europe.

Green Mountain has seen more than two-thirds of its market value stripped away since February; it now trades on the Nasdaq Stock Market in the $24 (U.S.) range, down from a 52-week high of $84.78.

New York hedge fund specialist David Einhorn said earlier this month that Green Mountain, with what he believes is a high-cost and poorly managed structure, is vulnerable to the rising competition in an already tough, crowded market.

Editor's note: An earlier online version of this story incorrectly said that Wal-Mart was yet to begin selling the Esio Beverage machine using single-cup pods. This online version has been corrected.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More


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