What Company Will Coca-Cola Drink Up Next?

Inside A Jamba Juice Co. Store Amid Comprehensive Expansion
David Paul Morris/Bloomberg/Getty Images

Coca-Cola (KO) can't seem to quench its thirst for acquisitions and strategic partnerships. Last week, it announced that it would invest $2.15 billion for a 16.7 percent stake in energy drink giant Monster Beverage (MNST). This follows a similar investment earlier in the year for Keurig Green Mountain (GMCR), when Coca-Cola bought into the leader of single-cup coffee in two transactions totaling roughly $2 billion for a 16 percent combined stake.

It's not just this year when the world's leading soft drink company has bellied up to the bar to invest in other beverage companies. Coca-Cola has a long history of acquiring beverage companies, and since 1995's deal for root beer giant Barq's, it has focused on buyouts outside of its carbonated beverage stronghold.

Coca-Cola acquired Odwalla in 2001 to expand into fruit juices and smoothies. It was a big year in 2007 when it snapped up iced tea specialist Fuze and -- in its biggest deal to date -- paid more than $4 billion for Glaceau, the company behind fortified water leader vitaminwater.

Whether it's been outright buyouts or Coca-Cola's shift to snap up minority stakes the way it has twice this year, it wouldn't be a surprise to see Coca-Cola make another deal before long. Let's go over a few publicly traded companies it could potentially purchase.

Reed's (REED)

The parent company putting out Reed's and Virgil's premium craft sodas may seem to be a step further into the soft drinks realm that Coca-Cola is trying to diversify from, but the smallish Reed's would give the soda giant a new way to grow. Reed's brews its drinks with roots, herbs and spices, and the all-natural approach makes it's brand popular at organic grocers and other high-end supermarket operators.

In other words, Reed's Ginger Brew and Virgil's gourmet root beer offer ways into the one area where soda sales are growing. Stateside sales of diet and non-diet soft drinks slipped last year, but Reed's sees sales of Reed's and Virgil's climbing 15 percent to 20 percent this year. Analysts see expanding profitability next year on 16 percent top-line growth. Coca-Cola would increase its reach, cashing in on the trend of natural carbonated sodas.

Primo Water (PRMW)

Coca-Cola is no stranger to the bottled water business. Beyond vitaminwater, Coca-Cola also puts out Dasani and smartwater. But it's not a player in larger water bottles, and Primo would give it a proven provider of multi-gallon purified bottled water, self-service refill water and water dispensers.

Primo Water has had its challenges, including an ill-fated foray into home carbonation, but Primo Water's flagship business has been liquid gold. Many leading supermarkets and drugstores are Primo partners, allowing consumers to exchange water drums. Net sales climbed 13 percent in its latest quarter, fueled by a 5 percent uptick in water and a 28 percent surge in dispensers.

Jamba (JMBA)

Smoothies have exploded in popularity. Leading burger chains and coffeehouses now offer smoothies, but Jamba Juice remains the country's largest standalone operator, with 857 locations worldwide.

Jamba has been expanding beyond smoothies, and the push into freshly squeezed juice bar offerings helped contribute to a 2.2 percent increase in system-wide comparable-store sales growth. Revenue is declining as it transfers company-owned locations to successful franchisees. Just 30 percent of Jamba Juice stores are company-owned units. However, the uptick in franchisee stores has resulted in improving margins. Adjusted earnings climbed 21 percent in its latest quarter.

Not on the Shopping List

There are plenty of names that Coca-Cola is unlikely to buy. Starbucks (SBUX) would be a dream fit for Coca-Cola, but with its market cap of $58 billion, it's just too rich for Coca-Cola's blood. SodaStream (SODA) may get bought out by a beverage giant, but it won't be Coca-Cola. When Coca-Cola bought into Keurig Green Mountain, it included support for upcoming SodaStream rival Keurig Cold.

Coca-Cola's likeliest deals at this point would be to buy more or all of Keurig Green Mountain or Monster. However, since both stocks have risen sharply since Coca-Cola made its initial investments earlier this year, it would fare better just buying its next company outright.

We'll see where it goes next, but the one thing that's a fairly safe bet is that Coca-Cola will buy another beverage company.

Motley Fool contributor Rick Munarriz owns shares of Jamba, Keurig Green Mountain and SodaStream. The Motley Fool recommends Coca-Cola, Keurig Green Mountain, Monster Beverage, SodaStream and Starbucks. The Motley Fool owns shares of Monster Beverage, SodaStream and Starbucks 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 newsletter services free for 30 days.