Coca-Cola is planning to allow customers make its sodas and other beverages at home as it ventures into new territory.
The drinks giant has bought a 10 per cent stake in Green Mountain Coffee Roasters Inc for $1.25 billion which would help launch Green Mountain’s new cold drink machine planned for release as soon as October.
Under their 10-year agreement, the companies will collaborate on the development and introduction of Coca-Cola products on Green Mountain’s upcoming machine that will serve both carbonated and non-carbonated beverages, including soft drinks, tea and juice
The deal comes as SodaStream makes a concerted effort to cement its place as the leading at-home carbonation machine in U.S. kitchens.
Shares of Green Mountain soared 42 per cent to $114.85 in extended trading earlier this week, while those of its likely new rival, SodaStream International Ltd, retreated 3.9 per cent to $34.39.
Green Mountain’s Keurig machine popularised the use of pods – small packets containing everything from coffee, tea or hot chocolate powder – for easy, in-home, one-cup brewing of hot drinks.
The company has sold more than 30 million Keurig machines around the world for use in homes, offices and other locations.
The deal will make Green Mountain the global exclusive partner for the production and sale of Coke’s branded single-serve, pod-based cold beverages, the companies said.
Still, Green Mountain also retains the option to sign deals with other cold drink makers, President and Chief Executive Brian Kelley told Reuters.
That includes Coke rival PepsiCo Inc, which last year shot down rumours it planned to buy SodaStream.
A spokesman for Pepsi declined comment.
‘We’ll do deals with brands consumers love,’ said Kelley, who added that Green Mountain has coffee deals with most major chains, including Starbucks and Dunkin’ Donuts .
‘We are really excited to start with Coca-Cola,’ said Kelley, who came to Green Mountain from the world’s largest soda maker, where he was viewed as a product-savvy executive with expertise in product and supply chain management.
Green Mountain’s cold drink machine is scheduled to debut in fiscal 2015, which begins in October this year.
Coca-Cola CEO Muhtar Kent said on the call that the deal would give his company access to new business opportunities.
He added that it would enhance Coca-Cola’s bottling system and that its bottlers would have a complimentary role.
‘This gives Green Mountain a beverage partner with some hugely powerful global brands. For Coke, it gives them access to some really cool, new cutting-edge pod cold-beverage technology,’ said John Sicher, editor and publisher of Beverage Digest.
Sicher said soda sales in the United States have been in decline since 2005, while growth in pod-based coffee brewing has boomed.
Under the terms of the agreement, Coca-Cola will acquire roughly 16.7 million newly issued shares of Green Mountain.
The new shares have been priced at $74.98, which represents the trailing 50-trading-day volume weighted average price as of market close.
Coca-Cola has the option to increase its minority stake up to 16 per cent through open market purchases of Green Mountain common stock during the first 36 months, a spokesman for the Coca-Cola said.
The significant after-hours move in Green Mountain’s stock appeared to be a classic short squeeze as traders who bet against the stock scrambled to cover their positions.
David Einhorn, who runs hedge fund Greenlight Capital Inc., was among investors with short positions in Green Mountain as of October 15. Greenlight’s spokesman declined to comment to Reuters on Wednesday.
The most recent data from Nasdaq, which dates to January 15, had short interest in Green Mountain at about 25 per cent of shares outstanding – about 37.6 million shares.
Green Mountain also plans to launch a new hot drink brewing system this fall. Called Keurig 2.0, it will use both single-serve K-Cups and larger-sized K-Carafe packs that brew 28 ounces of coffee.
Culled from Daily Mail