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Keurig Dr Pepper has been officially charged by the US Securities and Exchange Commission (SEC) for making misleading statements about the recyclability of its K-Cup beverage pods, a significant component of its coffee systems business.

The company has agreed to pay a civil penalty of $1.5 million to settle the charges.

SEC's findings reveal that in its annual reports for fiscal years 2019 and 2020, Keurig asserted that testing with recycling facilities validated the effective recyclability of K-Cup pods.

However, SEC noted that two major US recycling companies had raised concerns about the commercial viability of curbside recycling for these pods and had indicated they would not accept them for recycling. This information was not disclosed to investors, raising questions about the integrity of Keurig's reporting practices.

John T Dugan, associate director of SEC’s Boston regional office, said: “Public companies must ensure that the reports they file with SEC are complete and accurate.” He also highlighted that companies are obligated to provide all relevant information that could influence investor decisions.

Keurig's K-Cup pods have been a driving force behind the company’s sales, particularly in the face of growing consumer concerns regarding environmental sustainability. Research from a Keurig subsidiary indicated that environmental factors significantly influence consumer purchasing decisions regarding coffee brewing systems.

SEC's order found that Keurig violated Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1. While the company did not admit or deny the findings, it agreed to a cease-and-desist order.

A spokesperson for Keurig told FoodBev: "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."

They added: "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 US recycling system for all packaging materials through KDP actions, collaboration and smart policy solutions."

SEC's investigation was conducted by a team from its Boston regional office, including Michael Franck, Cassandra H Arriaza, Susan Cooke and Michele T Perillo.

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