Coca-Cola Gets into the Home Carbonation Wars

Jacob Harper |

While most consumer goods companies sell a diverse array of products, or have at least a handful differentiated offerings, there are a select few that have found success with basically a single product. Green Mountain Coffee Roasters (GMCR) and their single-serving coffee cups, or “K” cups, are one. SodaStream (SODA) and their eponymous home carbonation product are another.

But that’s changing as a major player in the beverage industry, Coca-Cola (KO) , has aggressively bought into Green Mountain, spurring that company‘s foray into a second product line. Specifically, the exact same product line SodaStream is engaged in.

Green Mountain’s critics have long maintained that the company is dead in the water without a second product. At a loss to devise a second offering, the company has resorted to consumer tricks like making K-cup machines that don’t work with knockoffs. But that sort of copyright protection trickery is merely a stopgap before technology and copycats runs them out.

Rumors began circulating last year that Green Mountain was devising their own home carbonation unit, the "Karbon," and Coca-Cola bought into their plan. Coca-Cola first took a 10 percent stake in the company. And, on May 12, they announced they had increased their ownership of Green Mountain to 16 percent, with plans to roll out their own products that work with Green Mountain’s single-serving coffee and home carbonation products.

By putting their money behind Green Mountain, Coca-Cola deals another blow to Green Mountain’s critics, notably short-seller David Einhorn, who has long been incredibly bearish on the K-cup maker. Einhorn and his bear compatriots have long maintained that Green Mountain is a one-trick pony, due for a monumental crash.

With Coca-Cola’s vote of confidence, the chances of that crash occurring looks to be minimized even further. News the Coke had doubled down on Green Mountain caused shares of GMCR to pop 9.52 percent on the day to hit $121.25. Shares of SodaStream, meanwhile, dropped 2.9 percent to hit $40.46 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
SODA SodaStream International Ltd. 38.75 0.05 0.13 184,206
GMCR Keurig Green Mountain Inc n/a n/a n/a 0
KO Coca-Cola Company (The) 42.00 1.02 2.49 28,125,775
GUMCF Gourmet Master Co Ltd Ord n/a n/a n/a 0

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