Keurig: Grounds for Change
By: Kelly Guo
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Filtering the Sustainability Challenge
Keurig Dr Pepper (KDP) has established itself as a leader in the single-serve coffee industry, holding an impressive 23 percent market share of coffee pods in the U.S. Keurig’s iconic K-Cup pods, introduced in 1996, played a significant role in shaping the growing trend of at-home coffee consumption. As a major player in this space, Keurig prides itself on innovation, sustainability, and consumer trust.
Keurig’s recent sustainability efforts include ambitious goals, such as supporting regenerative agriculture on 250,000 acres of farmland by 2030 and achieving 100 percent sustainably sourced coffee. However, these efforts have been overshadowed by accusations of greenwashing. In September 2024, KDP faced a $1.5 million Securities and Exchange Commission fine for misleading recyclability claims on its signature K-Cup pods. Despite Keurig promoting its pods as "100 percent recyclable," they failed to disclose that two major U.S. recycling companies had deemed curbside recycling of K-Cup pods as commercially unfeasible and refused to accept them. Research by a Keurig subsidiary found that environmental concerns significantly influenced consumers’ purchasing decisions. As a result, this incident has highlighted the importance of aligning environmental promises with tangible action to maintain consumer trust.
Keurig targets adults aged 20 to 50, particularly middle-income professionals, who prioritize convenience and quality in quick, single-serve coffee solutions. This demographic emphasizes commitments to sustainability, with 64 percent of consumers expressing high levels of concern about the environmental impact of the goods and services they use. A 2023 study by McKinsey and NielsenIQ found that products with ESG-related claims experienced a 28 percent faster sales growth than their conventional counterparts over the past five years, illustrating a growing demand for environmentally and socially responsible goods. Unfortunately, lapses in transparency have demonstrated how greenwashing can undermine the trust of eco-conscious buyers in such products.
Serving Consumers Daily Brew
Driven by consumer demand for convenience, the global single-serve coffee market has continued to grow rapidly; it is projected to double in size from $834 million in 2023 to $1.7 billion by 2032. As consumers increasingly shift their purchasing patterns to favour sustainable options, Keurig’s competitors, like Nespresso, have gained a competitive advantage by offering more sustainable aluminum pods. These pods are more straightforward to recycle than Keurig’s polypropylene-based K-Cups.
The Shadow Behind Sun-Grown Coffee
Many environmental and economic factors have converged to create immense sustainability challenges for the coffee farming industry. Today, most coffee farms are modest, family-owned operations—approximately 95 percent are smaller than 5 hectares—and lack the scale and resources of larger estates. Furthermore, recent extreme weather crises, such as significant droughts in Brazil, have reduced yields and profitability for farmers. These restraints have limited smaller farms’ ability to implement sustainable practices.
Without access to ecologically viable alternatives such as agroforestry and modern irrigation, farmers have often had no choice but to continue relying on conventional sun-grown coffee methods—an environmentally damaging farming method dating back to the 1970s. This approach entails the application of heavy chemical inputs to compensate for nutrient loss in the soil, leading to widespread deforestation, soil degradation, and water overuse. In particular, sun-grown coffee requires 140 litres of water to produce a single cup of coffee, leading to increasing resource constraints in areas that are already water-scarce. As of 2024, over 40 percent of coffee-growing areas are estimated to employ such methodologies in regions such as Colombia, Mexico, and Central America.
Choose. Cooperate. Enjoy.
A solution to the coffee industry’s sustainability challenges is the cooperative model, where organized groups of smallholder farmers collaborate to pool resources and mutually guarantee access to critical resources such as financing, equipment, and certifications (e.g. Fair Trade, Rainforest Alliance), which are often unattainable independently. Cooperatives also take advantage of democratic management structures to ensure that decision-making reflects the interests of all members. Since the early 20th century, coffee cooperatives have proven their ability to play a vital role in the global supply chain in locales such as Colombia, where their output constitutes over 30 percent of the total crops sold.
Case Study: Cooxupé – A Leading Coffee Farming Cooperative
Established in 1957, Cooxupé has evolved into the world's largest coffee cooperative, with 97% of its over 18,000 members being small-scale, family-run farms. In 2022, the cooperative produced 6.8 million bags of coffee beans, solidifying its position as a prominent coffee exporter in Brazil. To address the growing global demand for sustainable farming practices, Cooxupé launched the Gerações Protocol, a comprehensive sustainability program to enhance longevity and production quality. This initiative provides technical and financial support to farmers, facilitating the adoption of sustainable practices and promoting economic, social, and environmental well-being within the coffee-growing communities. The program has already engaged over 400 producers, with over 100 Cooxupé technical professionals working directly with farmers to implement these practices. Cooxupé demonstrates how cooperative models can drive sustainable development and economic growth in the coffee industry through these efforts.
Keurig can learn from Cooxupé’s success by adopting its holistic approach to sustainability, farmer advocacy, and transparency. Cooxupé’s Gerações Protocol shows the importance of establishing clear guidelines and support systems to help farmers adopt sustainable practices. For Keurig, building upon these established strategies can be the key to creating a resilient supply chain, enhancing its reputation, and aligning its operations with consumer demands for eco-conscious practices.
From Bean to Cup - The Solution
As a key industry player, Keurig has the influence and resources to establish its cooperative in Brazil, the world's largest coffee producer. In May 2024, Keurig Dr Pepper and Keurig Trading opened KDP Brasil Global Sourcing in Varginha, Brazil, to enhance their coffee supply chain's resilience and transparency. This office serves as a center for buying, logistics, risk management, and quality control, enabling direct engagement with Brazilian coffee suppliers. With this infrastructure, Keurig has established a strong presence in Brazil and developed a strong network of relationships with local farmers. This network enables them to effectively recruit farmers for their cooperative, allowing them to improve their income and sustainability practices and creating a more resilient and ethical supply chain for Keurig.
Members pay an annual fee, along with Keurig’s investment, funds, shared resources, technical support, and training programs. By respecting the democratic governance model while contributing to strategic and operational areas, Keurig can ensure transparency, accountability, and long-term sustainability for the cooperative. This balanced approach aligns with the cooperative’s mission of empowering farmers while strengthening Keurig’s supply chain and sustainability goals.
Partners in a Pod
Keurig can also capitalize on its current partnerships to enhance participating farmers’ access to essential technologies. Smallholder farmers, producing around 84 percent of the world’s coffee, face significant financial challenges in adopting these advancements. A cooperative model can help bridge this gap by pooling resources, enabling smallholders’ access to infrastructure, and supporting training to implement sustainable farming techniques. As a founding World Coffee Research (WCR) member since 2012, Keurig is uniquely positioned to apply WCR’s expertise and initiatives to drive these efforts forward.
WCR focuses on accelerating innovative solutions to grow, protect, and enhance the global supply of high-quality coffee, ensuring long-term sustainability for the industry and its producers. In 2023, WCR germinated and shipped 5,000 novel and genetically unique Arabica seeds to six countries as part of the Innovea Global Coffee Breeding Network. This initiative aimed to accelerate productivity, disease resistance, and quality attributes, addressing challenges posed by climate change. Within their cooperative, Keurig can push forward the widespread distribution of these resilient plants to smallholder farmers, ensuring they benefit from the latest agricultural advancements. This approach strengthens the coffee supply chain by safeguarding its foundational resource — the coffee plant.
Additionally, Keurig’s experience partnering with other existing organizations like Root Capital and Feed the Future demonstrates its ability to support farmers through financial assistance and training programs. For example, in 2021, Keurig partnered with Root Capital, a lending and advisory services firm, to purchase raw coffee beans from farmers and help scale their businesses. This further enhanced Keurig’s credibility and appeal to potential cooperative members.
The Coffee Tree Connection
Keurig can play a crucial role in helping farmers transition to agroforestry as part of its cooperative's sustainability efforts. Agroforestry integrates trees and crops into coffee farming systems to boost biodiversity, improve soil health, and protect coffee plants from extreme weather. These trees act as carbon sinks, storing approximately 8 tonnes of carbon per hectare annually, helping offset coffee production's carbon footprint. While this approach boosts ecological balance and coffee cultivation resilience, it involves higher initial costs — approximately $6,400 per hectare for planting (~10% more than monoculture systems) and $3,000 per hectare in annual management (~9% higher).
Through a new partnership with ECOTIERRA, a sustainable agroforestry project developer and operator, Keurig is helping small-scale coffee farmers in Peru through technical assistance and governance support. Keurig's cooperative solution can extend this support, helping smallholder farmers overcome financial barriers and gain long-term environmental and economic benefits by subsidizing these costs, providing training, and facilitating access to sustainable certifications.
Keurig’s Path to Brewing Sustainability
In light of Keurig’s sustainability challenges driven by customer backlash over misleading environmental claims, establishing and co-managing a coffee cooperative offers a promising path forward. The controversy surrounding K-Cup pod recyclability exposed gaps in Keurig’s sustainability efforts, eroding consumer trust and illustrating the need for genuine, impactful solutions. Keurig can promote sustainable practices, strengthen local economies, and improve transparency across its supply chain by partnering directly with smallholder farmers. This cooperative model addresses core issues within the coffee farming industry, such as resource limitations and financial instability, which have hindered the adoption of sustainable methods. With Keurig’s oversight and resources, the cooperative can implement innovative solutions for farmers, reduce environmental impact, and mitigate the risks of greenwashing accusations. This approach aligns Keurig’s sustainability goals with actionable, on-the-ground changes that restore trust, support the brand’s reputation, and enhance the resilience of the coffee industry.
