We're still several months away from Keurig Green Mountain (NASDAQ:GMCR) making a splash in the carbonated beverage market, but the champ of single-serve coffee is aligning itself with some pretty powerful pop stars.
Dr Pepper Snapple Group (NYSE:DPS) announced on Wednesday that it would provide single-serve pods of its iconic carbonated brands for the Keurig Cold when the new platform launches in the fall.
This isn't just Dr Pepper. Some of the brands in Dr Pepper Snapple Group's arsenal include 7-Up, Canada Dry, Crush, and A&W. The company watches over more than half of the top 10 noncola brands.
This is a big catch for Keurig Green Mountain, especially after landing Coca-Cola (NYSE: KO) as an early supporter last year. Coca-Cola turned heads last February by announcing that it would back Keurig Cold. It also became an investor in Keurig Green Mountain itself, eventually shelling out roughly $2 billion for a 16% stake in the java giant.
Coca-Cola's investment was a big reason for Keurig Green Mountain shares soaring better than 75% last year, but the presence of the reigning king of carbonated beverages suggested rival brands would be shut out. That's clearly not the case with Dr Pepper. PepsiCo (NASDAQ:PEP) might have resorted to a test late last year with SodaStream (NASDAQ:SODA), but it seems other beverage heavyweights aren't afraid to partner with Keurig Green Mountain despite having Coca-Cola as a minority investor.
Then again, Keurig Green Mountain and Dr Pepper Snapple Group were chummy before Coca-Cola came along. They teamed up in 2012 for Snapple-branded teas that come in K-Cups for Keurig's flagship brewer to be brewed over ice and marketed as flavored iced teas.
Wednesday's announcement is bad news for SodaStream. The multiyear arrangement makes Keurig the exclusive producer of single-serve, pod-based carbonated Dr Pepper Snapple Group brands utilizing fountain syrup. That is a pretty big commitment for a product that is still months from hitting the market. The silver lining for SodaStream is that the development does open the door for a deeper relationship with PepsiCo, if not a full buyout by the soda maker.
Keurig Green Mountain is taking the cold beverage market seriously. It snapped up foreign upstart Bevyz late last year, taking control of the beverage device that produces carbonated drinks, enhanced waters, juice drinks, sports drinks, and teas at the push of a button.
The appeal of the otherwise unproven Keurig Cold for the carbonated beverage brands over the globally established SodaStream platform is that it uses K-Cup-like portion packs that incorporate the carbonation process. This will maintain consistency in the home-brewed versions of their sodas, unlike SodaStream, where users dictate carbonation and syrup levels. It will also likely keep prices for the pods somewhat high so as not to eat into sales of the canned and bottled varieties of its partners' sodas.
The battle is brewing, but the real shots will be taken in the fall when Keurig Cold finally hits the market to take on SodaStream.
Rick Munarriz owns shares of Keurig Green Mountain and SodaStream. The Motley Fool recommends Coca-Cola, Keurig Green Mountain, PepsiCo, and SodaStream. The Motley Fool owns shares of PepsiCo and SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.