Did Coca-Cola Just Reveal a Secret M&A Plan?

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Did Coca-Cola Just Reveal a Secret M&A Plan?

News just broke that Coca-Cola (KO) upped its stake in the Vermont-based K-Cups maker, Keurig Green Mountain (GMCR).

Coca-Cola now owns 26,037,771 shares of the company, representing a 16% stake.

The transaction keeps Keurig on an epic price ascent!

Keurig’s domination of the single-cup, home-brewed coffee market has pushed shares from $17 to $113 in two years. It’s yet another reminder that genuine innovation always leads to outsized returns – 564%, in Keurig’s case.

But the storyline here is Coca-Cola.

I’m hearing chatter that its latest purchase of Keurig shares is simply a precursor to an outright acquisition.

But does that mean Coca-Cola is tweaking its 128-year-old formula for success, and positioning itself alongside the booming coffee industry?

More than 80% of Americans consume coffee. When you combine that with the severe coffee bean shortage being predicted in the months ahead – coffee prices have more than doubled since January – can you blame Coca-Cola?

(The rise in coffee prices is largely due to a major drought in Brazil, the world’s largest producer of coffee beans.)

But there’s more here than meets the eye. Much more.

Coca-Cola and Keurig are quietly collaborating on a “make your own soft drink” prototype, called “Keurig Cold.”

In the spirit of K-Cups, the Keurig Cold machine will give consumers the ability to make single-serving beverages ranging from carbonated sodas to non-carbonated drinks like iced teas and juices.

SodaStream International Ltd. (SODA) has already proven this niche market’s viability. Enjoying a classic first-mover advantage, the company has steadily grown revenue from $145 million in 2009 to $563 million in 2013. It sold close to 4.4 million soda-makers last year.

Yet SodaStream is suddenly vulnerable without an established partner in the beverage industry, whereas Keurig has aligned itself with the King.

As the old adage goes, “Pioneers get slaughtered and settlers prosper.”

I’m extremely bullish on this vast, untapped self-serve beverage market.

With Keurig near the top of my list of buyout targets, I see more upside from here.

Onward and Upward,

Robert Williams
Founder, Wall Street Daily

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