Keurig Green Mountain Bets $220M on Becoming a Pop Star
Keurig was already set to roll out a new maker of soft drinks -- Keurig Cold -- at some point during its fiscal year that ends in September. It even lined up Coca-Cola (KO) as both an investor and a provider of syrups. However, earlier this month it announced that it would invest $220 million to acquire a European company that's about to introduce a single-portion multi-drink system of its own. Keurig Green Mountain already had a 15 percent stake in Bevyz, but this move gives it complete ownership.
Bevyz has attracted a lot of attention this year. The machine makes both hot and cold beverages, and it lined up Cuisinart as a hardware partner and Coca-Cola rival PepsiCo (PEP) as a flavor provider.
Keurig Green Mountain and Bevyz were hoping to make a splash in the once-promising market of home-brewed soft drinks in 2015 as two separate entities, but now the combination leads one to wonder if Keurig Green Mountain will go through with both platforms or if it will combine both patents and the best of each machine to produce a better Keurig Cold system next year.
Pop Life Isn't Easy
A couple of years ago, the market would have been fizzing with excitement about a combination of beverage-making platforms, but the soft drink industry has since gone flat. The consumption in this country has been declining for several years, and niche leader SodaStream (SODA) has experienced a sharp decline in popularity.
SodaStream's most recent quarter was brutal. U.S. sales plunged 41 percent over the past year, and even the once-resilient European market posted a modest dip in sales.
This would seem to be an odd time for Keurig Green Mountain to be investing in carbonated beverages, especially when it's still posting strong growth in its flagship business. However, after posting double-digit revenue growth for years, Keurig Green Mountain's revenue growth decelerated to an 8 percent clip in fiscal 2014. There's a lot riding on Keurig Green Mountain's new Keurig 2.0 coffeemaker, and it can't afford to have all of its eggs in the same basket.
Yes, folks are turning away from sugary soft drinks. Coca-Cola, PepsiCo, and SodaStream are all struggling with the challenges of soda consumption trends. However, Keurig Green Mountain is already the top dog in home-based beverage makers. If it can broaden its offerings with Keurig Cold in the coming months, it will help accelerate revenue growth.
Keurig Green Mountain also can't let Coca-Cola down. Coke has invested roughly $2 billion in the company this year, and it's about more than just a coffee play. Coca-Cola sees Keurig Green Mountain as a way to breathe new life into the carbonated beverage market, and now with Bevyz in its back pocket, Keurig wants to be a pop star.
Motley Fool contributor 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. Want to make 2015 a winning investment year? Check out The Motley Fool'sone great stock to buy for 2015 and beyond.