While some analysts have expressed skepticism about the logic of Keurig Green Mountain’s $19-billion acquisition of Dr Pepper Snapple, the companies’ discrepant online performances help bring the move into sharper focus, according to Howard Koval, VP market insight at 1010data.
One widely noted advantage of the deal to form Keurig Dr Pepper is Keurig’s gaining access to Dr Pepper Snapple’s strong bricks-and-mortar distribution network.
Less noted, points out Koval, is that Dr Pepper Snapple’s online performance has lagged, while Keurig’s has flourished.
“We see clear reasons why this acquisition can generate success online,” he summed up in the company’s blog.
The Dr Pepper brand ranked fifth in sales during the past 12 months among soft drink brands tracked by 1010data, after Coca-Cola, Pepsi, Zevia and Sprite.
This likely reflects Dr Pepper’s low conversion rate — 3.7%, versus the category average of 7.7%, Koval observes. In comparison, Coca-Cola, Pepsi, Zevia and Sprite have conversion rates of 13.3%, 8.2%, 7.2% and 16.6%, respectively.
Meanwhile, the Keurig and Green Mountain brands (not counting the company’s other coffee brands) lead the online coffee category in sales by double digits. Further, the Green Mountain brand has a high conversion rate: 12%.
“Strong sales combined with high conversion indicate that Keurig is implementing
the right advertising and pricing strategies online,” and Dr Pepper Snapple should be able to tap into that expertise, Koval concludes.
If the deal does prove to be a winner, Keurig may look at expanding its soft drinks market position with more acquisitions, he notes.