Coca-Cola Working on At-Home Beverage System

Partners with Green Mountain on Keurig Cold

Published in CSP Daily News

By  Steve Holtz, Online News Director & Beverage Editor

ATLANTA & WATERBURY, Vt. -- The Coca-Cola Co. and Green Mountain Coffee Roasters Inc. signed a 10-year agreement to collaborate on the development and introduction of the Coca-Cola Co.’s global brand portfolio for use in GMCR’s forthcoming Keurig Cold at-home beverage system.

Under the global strategic agreement, GMCR and Coca-Cola will cooperate to bring the Keurig Cold beverage system to consumers around the world. In an effort to align long-term interests, the companies also entered into a common stock purchase agreement whereby Coca-Cola Co. will purchase a 10% minority equity position in GMCR.

As part of the strategic collaboration, GMCR will be the Coca-Cola Co.’s exclusive partner for the production and sale of the Coca-Cola Co.-branded single-serve, pod-based cold beverages. The two companies also will explore other future opportunities to collaborate on the Keurig platform.

“With the Coca-Cola Co. as a global strategic partner in our multi-brand at-home Keurig Cold beverage system, we believe there is significant opportunity to premiumize and accelerate growth in the cold-beverage category by empowering consumers with an innovative, convenient way to freshly prepare their favorite cold beverages at the push of a button,” said Brian P. Kelley, president and CEO of GMCR. “This global relationship combines the Coca-Cola Co.’s unparalleled brand, distribution and marketing strengths with GMCR’s innovative technology and beverage system expertise.”

“Our 2020 Vision calls for decisive and timely action to continuously improve and evolve our global system to best serve our customers and consumers around the world,” said Muhtar Kent, chairman and chief executive officer, the Coca-Cola Co. “This agreement demonstrates our creative approach to partnerships and ability to identify and stay at the forefront of consumer trends driving the industry. By pairing the Coca-Cola Co.’s brand leadership and global footprint with GMCR’s innovative technology, together we will be able to capitalize on the many exciting growth opportunities in the single-serve, pod-based segment of the cold beverage industry. Importantly, this partnership provides our consumers with a convenient way to enjoy the brands they love through in-home preparation.”

Coca-Cola officials said they do not anticipate the at-home beverage-maker to affect packaged-beverage sales in convenience stores and elsewhere. "We see single-serve, pod-based beverages as expanding the consumption of the non-alcohol-beverage category, not cannibalizing our current product offering as it will provide our consumers with a convenient way to enjoy the brands they love through in-home preparation," the company said in a statement to CSP Daily News.

Beverage company analyst Bonnie Herzog of Wells Fargo Securities, however, said that while “we view this as very positive as we believe this could help reignite CSD volumes,” she does have concerns for what it might mean for retailers and bottlers.

“We believe this partnership could accelerate the decline of packaged CSD beverages in the take-home channel,” she said in a research note. “In terms of the potential impact on competitors, this could ultimately: (1) grow the category incrementally as it creates new consumption occasions as we believe could be the case; (2) steal share from existing packaged Coca-Cola beverages; or (3) steal share from other packaged beverages, should consumers switch from Pepsi or Dr Pepper Snapple Group packaged beverages to Coke’s K-Cups, this would obviously have a negative impact.”

The investment is expected to close in March 2014, subject to customary closing conditions, including receipt of required regulatory approvals.

GMCR’s Keurig Cold single-serve beverage system is currently under development with expected availability in GMCR’s fiscal year 2015. While Keurig Cold is often compared to the SodaStream home beverage-maker, Keurig Cold will use precisely formulated single-serve pods to dispense freshly made cold beverages, including carbonated drinks, enhanced waters, juice drinks, sports drinks and teas in consumers’ homes with one-touch simplicity, quality and variety, similar to the Keurig brand hot beverage system platform. The cold system is expected to be a similarly open-architecture platform like the Keurig hot system.

By Steve Holtz, Online News Director & Beverage Editor
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