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.DL) 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 (NASDAQ: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.