Bottled soda sales are down, and they have been for a decade now. Coca-Cola, Co. is answering by entering a new market. Countertop soda makers have been around for a while now but the market is still in its growth phase. Today Coke agreed to the purchase of 10% share in the company Green Mountain Roasters, Inc., makers of the Keurig, for $1.25 billion. Coke plans to partner with them in the release of a countertop Coca-Cola maker.
Though the current market for homemade soda machines is still small, SodaStream International, Ltd. currently controls the market. The news of this acquisition was marked with concern to investors in SodaStream’s stock as it fell seven percent in after hours trading. For Coke, the market is ripe for the picking. SodaStream’s control of the market is far from stable and Coke will be the first soft drink giant to enter. It is likely that the combined positive brand reputations of Coke and Keurig will overtake SodaStream. As the countertop soda machine market leaves the growth stage of its life cycle and enters maturity we will likely see other competitors enter to challenge Coke for market share. Currently, this added convenience of in-home produced soft drinks will likely give Coke a competitive advantage against soda competitors such as PepsiCo.
Some think the introduction of this new line of soda products may cannibalize Coke’s original product, and take business away from the bottled coke industry. However, Coke CEO Muhtar Kent answered by emphasizing that the two industries are complementary, one providing convenience and the other being the standard (Esterl). Coke plans to restructure its franchise to accommodate their new in-home market while still working in the two other standard markets: bottlers and restaurant soda sales. Since information surrounding this product has yet to be released, one question that will need to be answered is: how low can Coke price this new line of products? Convenience comes with a price but at a certain point consumers may be content to stick with what they already know and love.
The official acquisition is supposed to go through by the end of the month. Green Mountain Roasters has said they will be releasing an entirely new platform from which to produce the soda. This research and development time will give SodaStream a chance to respond to the new competition. It will be interesting to see how they answer this step by Coke. Perhaps Soda Stream’s future will hold a similar merger with a soft drink company so as to add brand value to their image.
However you look at it, this acquisition was a changing point in the history of Coke, a company that has been around since 1886. Investors are optimistic as stock in Coke improved 1.1% and stock in Green Mountain Roasters went up a staggering 41% to 114.34 after hours trading.
De La Merced, Micheal J. “Coca-Cola to Buy 10% Stake in Green Mountain Coffee.”Dealbook NY Times. New York Times, 5 Feb. 2014. Web. 6 Feb. 2014.
Esterl, Mike. “Coming Soon: The Coca-Cola K-Cup.” Wall Street Journal [Pittsburgh] 6 Feb. 2014, Marketplace sec.: B1. Print.