There has been nonstop buzz about Keurig Green Mountain's (UNKNOWN:GMCR.DL) at-home carbonation system, dubbed Keurig Cold, ever since the company announced a partnership with Coca-Cola (NYSE:KO). The partnership guarantees that the greatest portfolio of beverage brands in the world will be available on the Keurig Cold system. However, serious questions remain as to when -- or even if -- Keurig Cold will hit store shelves. The answer has profound implications for Keurig Green Mountain investors.

Still under development
Keurig Green Mountain's stock price rocketed over 50% in the days following the announcement of its $1.25 billion partnership with Coca-Cola. The soft drink giant received a 10% stake in Keurig Green Mountain and will make various unspecified brands available for use with Keurig Cold. Keurig Green Mountain says it also plans to partner with other beverage companies, in addition to developing its own brands, to expand the platform's offering.

Source: Keurig Green Mountain.

Keurig Green Mountain hopes to launch Keurig Cold in its fiscal year 2015, which begins in October 2014. Despite the media frenzy about the Coca-Cola deal, many investors question whether or not Keurig Cold can become a legitimate player in the at-home carbonation market. Management has not yet committed to a specific launch date, suggesting that the technology is still being developed.

Unlike SodaStream's soda maker, Keurig Cold does not require CO2 cartridges. However, it is not clear how the system will carbonate beverages,  and some investors wonder if even Keurig Green Mountain knows how the system will do it. Value investor Whitney Tilson calls Keurig Cold "vaporware" -- a term used to describe publicly announced products that never make it to market. If Keurig Green Mountain cannot develop a workable carbonation technology, Keurig Cold may never be introduced.

However, given Coca-Cola's large investment in the company, it seems fair to give Keurig Cold's technology the benefit of the doubt. Even if Coca-Cola made the investment purely for exposure to the booming at-home coffee market, surely it would not lend its name to a product that is destined to flop. I think there is a good chance something comes to market, even if it is not a SodaStream killer.

The price isn't right
Even if Keurig Cold's technology were perfected, the value proposition is still unclear. Coffee pods are priced much higher per pound than traditional coffee ground packages; single-serve pods for brands like Folgers Black Silk regularly come out to over $50 per pound – pricier than all but the finest of coffees. Of course, with pods selling for less than a buck apiece, the consumer hardly notices the exorbitant price-per-pound.

It is far from certain that consumers would be willing to pay more for a pack of pods than for a 12-pack of Coke cans, however. If a 12-pack of Coke costs $4.49, or $0.37 per 12-fluid-ounce serving, why would a customer pay even $4.99 for a 12-pack of Coke pods? Keurig Cold will not be a time-saver like instant coffee brewers; customers can instantly drink the can of Coke. While avid soda consumers can save space by buying pods instead of cans, the average consumer may be more concerned about the kitchen counter space taken up by Keurig Cold rather than the refrigerator space taken up by cans. 

Of course, there are many reasons why some consumers would want to own a Keurig Cold. In addition to saving refrigerator space, not having to carry heavy 12-packs in from the car, and not having to recycle the bottles are a few of them. In addition, some consumers may want to use the device simply for carbonated water. Since Keurig Cold does not require CO2 cartridges, it likely uses the pods to carbonate the drinks. Paying $100-plus for the Keurig Cold may be a good investment for these customers if cheap seltzer pods are available.

However, given that the utility of at-home carbonation may not have the same widespread appeal as at-home coffee brewing, carbonated pods may not achieve the same price premium as coffee pods. As a result, the profitability of the endeavor is highly uncertain.

There are a lot of ways that Keurig Cold could be a flop; the technology must be developed and the value proposition must be enticing. The uncertainty regarding both of these factors should make investors skeptical that the jump in the stock price is really warranted.

Keurig Green Mountain's fate hangs in the balance
Keurig Green Mountain's future profitability depends almost entirely on the successful launch of two new brewers: Keurig 2.0 and Keurig Cold. Investors should carefully consider the concerns about the Keurig Cold before attributing a high likelihood to its success.

Source: Keurig Green Mountain.

Keurig 2.0 is the means by which the company hopes to regain its competitive advantage. The new system utilizes electronic reader technology that brews only licensed K-Cups, keeping unlicensed pods from being used in the system and from driving down pod prices. However, with Keurig 1.0 brewers installed in 13% of U.S. households, it is unclear whether Keurig 2.0 can penetrate enough households to reestablish a meaningful competitive advantage, especially when millions of U.S. households already own a perfectly good Keurig brewer.

As a result of the deep concerns about Keurig Cold's viability, doubts about Keurig 2.0's market potential, and the company's astronomical stock price (30 times trailing earnings), Keurig Green Mountain stockholders should seriously consider whether or not it still makes sense to own the stock. If either device turns out to be a flop, the stock price could plummet. Buyers, beware!