Keurig's Coke Deal Could Be Good for SodaStream

SodaStream  (NASDAQ: SODA  )  is getting slammed.

The company behind the namesake machine that makes carbonated beverages hit a new 52-week low on Monday, and then came news Wednesday night that Coca-Cola (NYSE: KO  ) had agreed to provide brand flavors for Green Mountain Coffee Roasters (NASDAQ: GMCR  )  forthcoming Keurig Cold platform.

SodaStream may finally get some legit competition, and that's naturally spooking the market. 

However, this could be a positive development. The market doesn't necessarily see it that way, but let's go over a few ways in which this could be just what SodaStream needs.

  • A competitor typically introduces pricing pressure, but this event should actually firm up SodaStream's pricing. After all, do you think Coca-Cola is going to offer Keurig Cold flavors at price points that undercut its canned and bottled products? Instead of a price war, SodaStream may have the leeway to increase prices.
  • SodaStream shares popped last year on rumors that PepsiCo (NYSE: PEP  ) was interested in acquiring the company. It seemed crazy at the time, but now that Coca-Cola has a 10% stake in Green Mountain and a 10-year lock as a Keurig Cold partner, isn't this a dinner bell for PepsiCo to either partner with SodaStream or swallow it whole? The stock is now trading for a third of the rumored buyout price from last June.
  • Validation and education aren't always easy feats for a disruptive industry. SodaStream continues to sell a healthy number of beverage makers, but Coca-Cola and Green Mountain entering the market could draw more attention to the niche. This would be a positive for the entrenched and connected market leader: SodaStream.

It doesn't have to play out that way. Keurig Cold may start a price war. PepsiCo may decide to bankroll a third option. The education can come from a stateside company that doesn't carry the political stigma of SodaStream's main facility on the disputed West Bank.

However, the arrival of Keurig Cold is still likely to be more positive than negative for SodaStream.  

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  • Report this Comment On February 06, 2014, at 11:08 AM, Muffiestan wrote:

    what if pepsi takes 10% stake in GMCR alongside coke, is it gameover for SODA if that happens?

  • Report this Comment On February 06, 2014, at 11:12 AM, trpng0bily wrote:

    I expect that SODA will close the West Bank facility soon after its Negev facility is up and running (later this year). It will be a shame because the facility provides income to a lot of Palestinians (equal pay for Israeli and Palestinian workers in the facility), but the politics of international business (or business of international politics?) will force its closure, especially if Pepsi gets involved.

  • Report this Comment On February 06, 2014, at 11:29 AM, trpng0bily wrote:

    @ Muffiestan - That would be a very unusual arrangement. I actually think its great that Coke bought into GMCR rather than just signing a licensing deal because that makes the other softdrink manufacturers unlikely to license to GMCR (I can't see Pepsi licensing its products to its main competitor).

  • Report this Comment On February 07, 2014, at 7:18 PM, LQM2 wrote:

    GMCR wants Keurig Cold to be an open system...it says that very clearly in Coke's press release. Therefore, it seems very possible PEP sells across that platform just like the various coffee guys sell k cups. SODA in trouble.

  • Report this Comment On February 07, 2014, at 8:00 PM, Idiot2fool wrote:

    Yes they would undercut the pricing. They can discount the price of packaging and shipping and other costs. Plus just because sime by a machine doesnt mean supermarkets dont stop carrying and people dont stop buying canned and bottled. Also SODA pricing point sucks, their containrs are annoyingly small. There is no value to consumer wheb they could have well made it a value to reuse 2 liter bottles and save people money and still made a killing. Their fault, missed opportunity, and making an open system a la google android will render yhem useless. Too bad soda, you greed, you lose.

  • Report this Comment On February 08, 2014, at 2:29 PM, vespacian wrote:

    I have never made money on an Israeli stock.

    The market for this company appears a bit dubious.

    I have tried earlier seltzer products for fizzing up fruit juice. However, now imported naturally carbonated Italian mineral water at Whole Foods is so inexpensive that it is better to mix some natural water with the juices. Tastes a lot better.

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