Dive Brief:

• The U.S. Securities and Exchange Commission announced Tuesday that it charged Keurig Dr Pepper with making inaccurate statements about the recyclability of its K-Cup single-use beverage pods. KDP agreed to pay a $1.5 million civil penalty to settle the charges.
• The SEC alleged that KDP stated in reports for fiscal years 2019 and 2020 that its K-Cup single-use coffee pods could be “effectively recycled” based on testing at municipal recycling facilities. However, the company did not disclose that two of the nation’s largest recycling companies that were involved in the testing expressed “significant negative feedback” about the feasibility of recycling the pods curbside at that time, according to the SEC order.
• A spokesperson for Keurig Dr Pepper said in an emailed statement Tuesday that the company is “pleased to have reached an agreement that fully resolves this matter.” The spokesperson said that K-Cup pods are made from recyclable polypropylene plastic, which “is widely accepted in curbside recycling systems across North America,” but still, “they are not recycled in many communities.” The company encourages consumers to verify acceptance with their local recycling program.

Dive Insight:

In 2015, John Sylvan, the person who invented K-Cups in the 1990s, said he regretted creating the product because it wasn't recyclable. At the time, the plastic pods received a lot of criticism for negative environmental impact.

KDP’s pod testing began in or around 2016, when the company was still Keurig Green Mountain; it later combined with Dr Pepper Snapple Group in 2018. Keurig described tracking the pods’ progress through recycling facilities and also seeking feedback from the recycling industry.

The two recycling companies who gave negative feedback “indicated that they did not presently intend to accept pods for recycling,” the SEC order says. While the recyclers are unnamed, the document states they collectively operate more than one-third of U.S. recycling facilities, and they operate what KDP characterized as high-tech equipment “that is able to sort items well.”

Despite the negative feedback, the SEC’s order outlined that KDP disclosed in a 10-K form submitted on Feb. 27, 2020, that extensive testing at MRFs shows the pods can be effectively recycled. The following year’s annual report contained similar claims, along with a mention that KDP committed $10 million to the Polypropylene Recycling Coalition, an effort led by The Recycling Partnership, to advance domestic PP recycling. The subsequent year’s filings did not contain such claims, the SEC said.

“While the testing demonstrated that pods typically could be successfully sorted from other materials at an early stage of the process within the recycling facilities,” KDP’s omission of the negative feedback from recyclers makes the submitted documents “incomplete and therefore inaccurate,” the SEC order said.

“Public companies must ensure that the reports they file with the SEC are complete and accurate,” John Dugan, associate director of the SEC’s Boston Regional Office, said in a news release. “When a company speaks to an issue in its annual report, they are required to provide information necessary for investors to get the full picture on that issue so that investors can make educated investment decisions.”

In addition to issuing a $1.5 million civil penalty — to be paid within 14 days of the SEC issuing its order — the agency ordered KDP to cease and desist from committing further violations of this SEC rule.

KDP’s spokesperson said the company remains “committed to a better, more standardized U.S. recycling system for all packaging materials through KDP actions, collaboration and smart policy solutions.”

During FY 2019, pod sales “comprised a significant percentage of net sales” in Keurig’s coffee systems business segment, and that segment represented a significant percentage of Keurig’s overall net sales, the SEC document said. Its coffee systems segment, which includes pods, did $4.23 billion in sales in 2019, or 38% of the company’s total.

In 2017, Keurig detailed testing of new pods made from PP instead of a polystyrene blend. At the time, it reported that 90% of the PP pods made it through the container line at eight MRFs. In late 2020, the company declared that it had achieved its goal to make all of its K-Cups pods recyclable.

Earlier this year, KDP announced it would introduce single-serve coffee pods that are made from plant-based materials, that potentially could be compostable, as an additional offering to its existing PP pods. And in June, the company released its corporate responsibility report that upheld its commitment to 2025 sustainable packaging goals such as making all packaging recyclable or compostable.