After years of denying the promise of at-home carbonation, the big boys in the soda biz are finally jumping in with two feet.
Shares of SodaStream (NASDAQ:SODA) rose by more than 12% in Wednesday's early trading following reports the small-cap company is in talks to sell up to a 16% minority stake to an unnamed strategic entity.
The news comes a little over two months following Keurig Green Mountain's (NASDAQ:GMCR.DL) own strategic partnership with Coca-Cola (NYSE:KO). Under that long-term deal, Coca-Cola not only took a 10% stake in Keurig Green Mountain worth $1.25 billion -- which is significantly higher, by the way, than SodaStream's entire $850 million market cap -- but also promised to make its brand portfolio available and put its marketing prowess behind Green Mountain's forthcoming Keurig Cold carbonation system.
Curiously enough, while SodaStream stock initially plunged on the Coke/Green Mountain announcement, shares later rose after investors realized the development was actually an incredible piece of validation for SodaStream's thriving platform.
And the winner is...
So who might this mystery partner be?
If I were a betting man, I'd place most my chips on Coke's archrival PepsiCo (NASDAQ:PEP). After all, shares of SodaStream popped last summer when rumors surfaced that PepsiCo was considering whether to acquire the smaller company -- though Pepsi later emphatically insisted that was "completely and totally untrue."
At the time it seemed apparent an all-out acquisition just didn't make sense, as it would not only anger bottlers that depend on Pepsi's existing business model, but also eat into Pepsi's core canned and bottled beverage sales. Still, given the seemingly unstoppable at-home carbonation bandwagon, I went out on a limb to suggest Coca-Cola and PepsiCo would both eventually need to cave to consumers' changing habits.
Now that Coca-Cola and Keurig Green Mountain are out in the open, perhaps PepsiCo feels it has little choice but to follow suit by forming a tag team with the current market leader in SodaStream. If this is true -- and keeping in mind Green Mountain's Keurig Cold system still isn't slated to hit the market until sometime in 2015 -- it could be a great opportunity for both Pepsi and SodaStream to widen that lead.
In the end, even after today's pop, that's why I have no intention of selling my own shares of SodaStream anytime soon. Over the long term, I remain convinced the most impressive returns will be reserved for patient, long-term investors.