SEC charges Keurig Dr Pepper over K-Cup recyclability

The Securities and Exchange Commission has charged Keurig Dr Pepper over what the agency said are inaccurate claims by the company about the recyclability of its disposable K-Cup pods, the agency said Tuesday.

Keurig has agreed to pay a $1.5 million civil penalty without admitting or denying the agency’s findings.

As consumers have become more conscious of their carbon footprints, questions about K-Cups’ environmental impact have dogged Keurig for more than a decade. The pods’ inventor told the Atlantic that he feels bad “sometimes” about creating K-Cups because of the waste they generate. A 2018 lawsuit over recycling claims led to a $10 million class-action settlement. By the end of 2020, K-Cups became fully recyclable, according to the company.

But before the company reached that milestone, it was already telling investors that the pods could be recycled.

Keurig said in its annual reports for fiscal 2019 and 2020 that testing with recycling facilities found that K-Cups could be effectively recycled. However, the SEC said the company failed to disclose that two of the largest U.S. recyclers told Keurig that they didn’t intend to accept the disposable coffee pods for recycling and had expressed “significant concerns” about the financial viability of recycling K-Cups collected curbside.

The company’s claims could have swayed some consumers, boosting sales of both K-Cups and its brewers. Research conducted earlier by a Keurig subsidiary found that environmental concerns were a key factor that some shoppers considered when buying a Keurig coffee machine, according to the SEC.

In Keurig’s fiscal second quarter, sales of K-Cup pods and the company’s brewing systems accounted for nearly a quarter of the company’s revenue, according to a company filing.

In a statement, a company spokesperson said, “We are pleased to have reached an agreement that fully resolves this matter.”

“Our K-Cup pods are made from recyclable polypropylene plastic (also known as #5 plastic), which is widely accepted in curbside recycling systems across North America,” the spokesperson said. “We continue to encourage consumers to check with their local recycling program to verify acceptance of pods, as they are not recycled in many communities. We remain committed to a better, more standardized recycling system for all packaging materials through KDP actions, collaboration and smart policy solutions.”