Cola Wars Shift To The Home Front

Cook up a batch of homemade popcorn and pull up a stool in front of the counter: the cola wars may be coming your kitchen. Green Mountain Coffee Roasters and Coca-Cola announced a 10-year agreement Wednesday to collaborate on introducing the latter’s “global brand portfolio” for use in the Keurig Cold at-home beverage system that is due to make it debut next year, as Karlene Lukovitz reports in today’s Marketing Daily

“Keurig Cold will use formulated single-serve pods to dispense cold beverages including carbonated drinks, enhanced waters, juice drinks, sports drinks and teas in a way similar to the Keurig brand hot system,” explains the Atlanta Business Chronicle’s Jacques Couret, who points out that the companies “also plan to investigate other opportunities to collaborate.”

"This global relationship combines The Coca-Cola Company's unparalleled brand, distribution and marketing strengths with GMCR's innovative technology and beverage system expertise," said Green Mountain president and CEO Brian P. Kelley. And Coke chairman and CEO Muhtar Kent maintained the “agreement demonstrates our creative approach to partnerships and ability to identify and stay at the forefront of consumer trends driving the industry.”

But what it really demonstrates is the growing impact of homemade carbonated beverages to both Coke’s and Pepsi’s market share. 

“It’s not a move to get into the coffee business but rather an aggressive push to compete directly with SodaStream, which sells do-it-yourself carbonation machines as well as the flavor syrups that go with them,” write Bloomberg BusinessWeek’s Venessa Wong and Kyle Stock. 

SodaStream has, of course, been in the news because of the furor over Scarlett Johansson's (uncensored) Super Bowl commercial in the face of calls for a boycott because the Israeli company operates a factory in an illegal settlement in the occupied West Bank. It’s a multi-nuanced story reported well by International Business TimesKate Shuttleworth and The GuardiansIan Black and Harriet Sherwood in recent days.

“In a world where Coke and Pepsi loyalty is feverish, lack of a brand-name cola product has prevented many consumers from embracing SodaStream, in spite of successful partnerships with brands like Kool-Aid, Country Time, and Cooking Light,” writes CNET’s Katie Pilkington. “Green Mountain CEO Brian Kelley previously served as a high-ranking executive at Coca-Cola, however, which works well for Keurig's new product.” 

Kelley joined Coke in 2007 and worked there until 2012, when he was named Green Mountain CEO. He had been named president of Coca-Cola Refreshments but never assumed the position, according to the Wall Street Journal’s Julie Jargon.

Some observers of the cola wars are counting on Pepsi to jab back, of course — so much so that SodaStream’s stock gained “as much as 14%, and finishing up 7%,” the Motley’s Fool’s Jeremy Bowman reported yesterday. 

“Now Coke has made their move into the at-home beverage market. What are the chances Pepsi won't respond?” a report from Citron Research, which publishes reports on heavily shorted stocks, observed, according to CNN’s Ben Rooney. “Unless they believe that Coke is DEAD WRONG — they have no choice. Hello, SodaStream!” 

Not everyone is convinced that SodaStream is the impetus to the Coke investment.

“John Sicher, editor and publisher of Beverage Digest, said he doesn't think the Coca-Cola deal is ‘a response to SodaStream as much as I think it's a response to Green Mountain's success with K-Cups and pods in the coffee business,’” reports Ad Age’s E.J. Schultz. “‘The pod business has been driving growth in the coffee category," he added, while the “soft-drink business has been relatively flat.’”

And analysts had a decidedly mixed reaction to the impact of the Coke-Green Mountain deal on SodaStream, Barron’s Ben Levisohn reports. Count CitiGroup’s Wendy Nicholson as one of the believers: “This deal validates the home carbonation category, and when [Coca-Cola] and [Green Mountain Coffee Roasters] start to advertise and market the cold platform, we think that could be good for [SodaStream] (especially as we believe [SodaStream] will be a considerably lower-priced system than the [Green Mountain Coffee Roasters] cold drink platform),” she wrote.

SodaStream itself put a happy face on the partnership announcement, saying it is “further recognition that custom carbonation is the future of the $260 billion at-home carbonated beverage industry,” Bloomberg BusinessWeek’s Duane D. Stanford and Elena Popina report. “We are proud of the innovation we have brought to the category, and our leadership role is changing the way consumers around the world enjoy carbonated beverages today.”

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