Will Dr Pepper Give SodaStream a Shot?

A popular dream among SodaStream (Nasdaq: SODA  ) investors is that, one day, either Coca-Cola (NYSE: KO  ) or PepsiCo (NYSE: PEP  ) will make its syrups available for owners of the home-based beverage-maker system.

Well, that's not going to happen. The two pop stars would have too much to lose. Alienating their bottlers and retail distributors would be a brutal mistake. And they could potentially disrupt their own models, especially if consumers start taking to the fresher homemade versions of their soft drinks.

But what about Dr Pepper Snapple Group (NYSE: DPS  ) ?

Yes, Dr Pepper has bottlers and distributors to protect. However, it doesn't have the healthy fountain sales where Coke and Pepsi have pretty much cornered the market. Perhaps more importantly, we now have a precedent for seeing the soda maker work with a home-based beverage maker.

Dr Pepper Snapple Group announced on Tuesday that it will team up with Green Mountain Coffee Roasters (Nasdaq: GMCR  ) to put out Snapple-branded portion packs. As part of Green Mountain's relatively new Brew Over Ice line of brewed beverages that are served over ice as cool refreshments, Snapple will be available in K-Cup and Vue packs for Keurig brewers early next year.

Will there be some discord at Snapple's bottling operations? Are grocery stores going to be hesitant to stock the K-Cup and Vue portion packs next to Snapple bottles, especially since they will probably retail at much lower price points?

But now that Dr Pepper has gone this route with its premium bottled-tea brand, isn't SodaStream the next evolutionary step?

For Pete's sake
SodaStream already has a Dr Pepper knockoff. Among the 60 flavors that are currently available as SodaStream syrups, the Israeli-based company offers Dr. Pete and Diet Dr. Pete. There's no mistaking what the concentrate is trying to emulate.

"Compare to Dr. Pepper," reads the Dr. Pete label .

Why wouldn't Dr Pepper get in on that action? Offering Snapple for Keurig owners next year must have come after weighing the incremental sales over the detrimental impact, concluding that it's in the company's best interest to cater to the DIY crowd.

Why shouldn't it follow the same path with its carbonated products?

Maybe it can even ink an exclusive deal to keep other soda companies away, the way Starbucks (Nasdaq: SBUX  ) did with Green Mountain by locking up its role as the only "super-premium" java brand on Keurig. Coke and Pepsi aren't coming -- and if they did, there's nothing stopping them from simply putting out their own syrups without SodaStream's blessing -- but it's better to be safe than sorry.

If not the Pepper, pour some salt
It doesn't even have to be Dr Pepper. The company is armed with plenty of popular pop brands. This is, after all, the company behind Canada Dry ginger ale and 7-Up.

It can always aim even lower. Offer up Hires or Stewart's as root beer syrups. Go with Sunkist orange soda or Sun Drop. It can dig even deeper into its portfolio and try to give its Venom line of energy drinks some more exposure.

After all, SodaStream isn't just a stateside play. More than half of its sales are currently taking place in Europe. Dr Pepper could benefit from SodaStream's global reach, especially in some areas including Sweden, where a quarter of all homes own a SodaStream machine.

In the end, somebody's going to do it. Just as SodaStream added Crystal Light and Country Time this summer, more brands will be coming to offset the company's in-house private-label approach.

Dr Pepper took a bold step with Tuesday's deal with Green Mountain. Now it's time to shake hands with SodaStream in a deal that would be even more of a win-win for the two companies.

Drink up
SodaStream is blazing as a consumer-facing growth stock, and the company offers an intriguing opportunity for growth that may be harder to duplicate than you might think. Our premium report on SodaStream explains the opportunities as well as the risks in the stock. The report comes with a year’s worth of updates, so just click here to get started.

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Green Mountain Coffee Roasters. The Motley Fool owns shares of PepsiCo, Starbucks, and SodaStream and has options on Green Mountain Coffee Roasters and Starbucks. Motley Fool newsletter services recommend Green Mountain Coffee Roasters, PepsiCo, SodaStream, Starbucks, and Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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