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Keurig head denies allegations of anti-competitive business practices

Keurig Canada president Stéphane Glorieux addressed the Toronto Region Board of Trade on Monday, talking about how his company drives change through innovation in the beverage industry.

Brian B. Bettencourt/The Globe and Mail

The head of Keurig Canada Inc. denies that the company forces retailers into agreements that are anti-competitive, and says the company's brewing machines are built to be incompatible with rivals' coffee in order to "control the experience."

Stéphane Glorieux, president of Keurig Green Mountain Coffee Inc.'s Canadian and U.K. divisions, said the Vermont-based company plans to add to its list of retailers and coffee brands in order to widen the choices available to the 2.9 million homes and 200,000 offices in Canada that have Keurig coffee machines.

These agreements are the focus of an Ontario lawsuit and a complaint with the Competition Bureau against Keurig, alleging that the company uses anti-competitive business practices to maintain its market dominance, including signing retailers and brewing equipment makers to exclusive agreements, and telling stores and consumers only Keurig cups will work with their coffee machines.

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"Keurig will definitely engage and prove that all of these [allegations] are without merits," Mr. Glorieux said in an interview with The Globe and Mail. "We're very confident that we have a solid situation in front of us."

Toronto-based Club Coffee LP filed the lawsuit in September, and recently joined five other unnamed Canadian coffee companies in the complaint with the Competition Bureau.

Keurig is facing two similar lawsuits in the United States.

None of the claims have been proven, and a Keurig spokeswoman said the allegations are without merit.

Mr. Glorieux likened Keurig's stated incompatibility with rival coffee to apps made to run on Apple Inc.'s phones and tablets. "When you play with an app, you have to go through a platform called Apple. So it's a little bit of the same principle. That' s how we view ourselves so that we can control our quality," he said.

Club Coffee alleges this control caused it to be shut out of retailer Canadian Tire and to lose the business of U.S. chain Kroger Inc., a buyer worth $20-million a year. John Pigott, Club Coffee's chief executive officer, said Keurig's consumers and retailers are wary of buying Club Coffee's products, even though the cups do work with Keurig machines.

"They are seeking to control [the market] through a monopoly that will mean Canadians experience higher prices, experience less choice and experience less innovation that an open market would give them," said Mr. Pigott, whose company roasts and packages coffee in all formats for retailers and cafés across North America.

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Keurig has grown rapidly along with the popularity of single-serve coffee cups.

The company employs 1,600 people in Canada and makes and sells coffee under such brands as Van Houtte and Starbucks through several retailers, including Wal-Mart and Costco.

Mr. Glorieux, a former executive with Kraft Foods Group Inc., said Keurig accounts for 25 per cent of all Canadian coffee sales and that one of his next tasks is to get a foothold in the United Kingdom.

"Our goal is to make Keurig a truly global brand," he said.

The company hopes to tap the market for cold drinks, using its machines to make Coca-Cola, using pods made under licence by the soft-drink company, which is a minority investor.

But the single-serve beverage business is an easy target for environmentalists, who say it generates mountains of plastic containers that are not recyclable. Club Coffee said it expects to soon launch tea and coffee in containers that are compostable; Keurig said it is planning to offer a recyclable pod by 2020.

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In the meantime, Keurig is sending used pods in B.C. to Lafarge Canada Inc.'s cement factory in Kamloops, where they are burned as an alternative to coal. Keurig is looking at a similar move in Montreal with an unnamed company.

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