For a long time, if there was an important acquisition in the beverage industry, it always seemed like PepsiCo (NYSE:PEP) was in the forefront and Inside Value selection Coca-Cola (NYSE:KO) was asleep at the switch. The most memorable deal of this sort was the sale of Gatorade, when Pepsi was willing to pay just a little bit more than Coke for control of a very important brand.

Since Neville Isdell became CEO, there has been visible improvement at Coke, and today it beat everyone to the punch by announcing it was acquiring Glaceau, the maker of VitaminWater and other enhanced and energy beverages, for $4.1 billion. Glaceau isn't as established or powerful as Gatorade, but the days of Coke sitting on the sidelines while Pepsi snatches up-and-coming brands among non-carbonated beverages -- like Sobe -- appear to be over. The acquisition should help Coca-Cola better compete with the likes of Red Bull, Hansen Natural (NASDAQ:HANS), and, of course, PepsiCo.

Coke and Glaceau have announced that Glaceau will be a division of Coca-Cola North America and the executive team will remain with the business for at least three years. This is a very smart move, if everyone can learn to work together. Glaceau's team has already built the VitaminWater product, brand, and supporting brands from the bottom up, and Coca-Cola can provide some of the best distribution in the business, and a lot of the blocking and tackling. In the long term, I think there is probably room for international expansion, too, which again plays right into Coca-Cola's strengths.

The price paid is tough to judge, because Glaceau is private. But I'm encouraged by the fact that Coca-Cola believes the deal will add to earnings in the first year. I also think this is a deal that is worth more to a Coca-Cola or a PepsiCo, because they are among the few companies that already have the distribution systems and marketing machines to ramp up the business. In other words, Glaceau is worth more to Coca-Cola than it is to almost any other company.

The only immediate negative about the deal is that Coca-Cola is cutting its share buyback to $1.75 billion to $2 billion for 2007 instead of the originally planned $2.5 billion to $3 billion. Still, if Glaceau works out as well as I think it can, there will be plenty more cash for future buybacks. I'm as much a fan of a good buyback as anyone else, but any negativity toward the cut in this buyback is pretty myopic.

If you're interested in bargain-priced stocks that have the potential to boost your portfolio, take a free 30-day trial to the Motley Fool Inside Value newsletter service.

Nathan Parmelee enjoys about one Coca-Cola product a day and vows he'll be taking another look at this company. At the time of publication, he had no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.