Coca-Cola to invest in potential rival of Israeli company SodaStream
As a fierce competitor with SodaStream International Ltd., the Coca-Cola Company has sought to acquire 10 percent of Green Mountain Coffee Roasters Inc. for $1.25 billion.
At the moment Green Mountain Coffee Roasters is targeting the homemade carbonated beverages market. Preceding last Thursday's announcement, a deal was made by Coca-Cola at $74.98 per share for Green Mountain; an average trading price within the past 50 trading days.
The share price of Green Mountain Coffee Roasters rose by 33% on Thursday and 107.75 dollars on Friday, giving the market capitalization of $16.1 billion. Coca-Cola has a market cap of $168 billion whereas SodaStream's market is pegged at $784 million dollars.
Based in Vermont, Green Mountain Coffee Roasters intends to become rivals with SodaStream. As one of the hottest companies on Wall Street, Green Mountain is a leading manufacturer of home coffee makers. Last year, the patents on the capsules they manufacture expired as generic companies entered the market. Realizing that it needs a new growth engine for its products Green Mountain has gone ahead with a plan to replicate its success in hot beverages with cold and carbonated beverages similar to those produced by SodaStream.
Both Coca-Cola and Green Mountain will be collaborating together to develop and market their brand of carbonated and non-carbonated cold beverages using the Keurig Cold platform, in pursuant to their ten year cooperation agreement. This agreement means that Coca-Cola will be entering SodaStream's key market with an investment of $1.3 billion dollars – almost twice as much the market cap of SodaStream.
Once effective, Coca-Cola will be battling with SodaStream directly by allowing consumers to make Coke beverages from the comfort of their homes using Keurig Cold machines. This will also enable Coca-Cola to market more environmentally friendly products – in response to SodaStream's claim against them.
This agreement demonstrates our creative approach to partnerships and ability to identify and stay at the forefront of consumer trends driving the industry," said Coca-Cola chairman and CEO Muhtar Kent to Globes in the statement announcing the collaboration. "This partnership provides our consumers with a convenient way to enjoy the brands they love through in-home preparation."
In spite all of that, the Keunig Cold machine has not been launched yet therefore it doesn't have a track record. Above all, this device has not yet proven itself against, SodaStream's major soda making machine, which is a proven commodity. Only in the coming year people will know how the entry of this product will affect its Israeli rival.