This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Coca Cola's Buffett-Like Green Mountain Coffee Roasters Deal?

Stocks in this article: GMCR KO

NEW YORK (TheStreet) - "[B]lah, blah, blah, yada, yada, yada. What are we writing? None of this really matters today! What matters is that Coca-Cola took a 10% equity stake in GMCR for $1.25B and entered into a 10-year strategic partnership with GMCR to develop the Keurig Cold home beverage system with Coca Cola's global beverage brands." -- CanaccordGenuity analysts

Coca-Cola (KO) counts Warren Buffett's Berkshire Hathaway (BRK.A) as its largest shareholder. However, it's unclear if the soda giant cut a deal that is in the mold of the 'Oracle of Omaha' in partnering with Green Mountain Coffee Roasters (GMCR) in its efforts to push into the cold brewing market.

Atlanta-based Coca-Cola is gaining a 10% stake in Green Mountain Coffee Roasters at an attractive price given that it was able to acquire shares at a 50-day volume weighted average price of $74.98, well below currently trading prices. The soda giant will also have the ability to boost that stake to 16%, according to the press release announcing the deal.

What isn't explained are the economics in the partnership, which will ostensibly seek to push a new line of Keurig brewers into the cold drinks market using Coca-Cola's brands. 

In 2013, Green Mountain Coffee Roasters hinted at an effort to diversify away from its coffee and hot drinks businesses and into cold beverages. However, Wednesday's partnership is a far-quicker and more well-wrought push in that direction than most analysts had expected.

Still, it will probably be years before the full financial impact of the deal is apparent.

Green Mountain Coffee Roasters and Coca-Cola did not disclose the financial terms underpinning the partnership. What both companies did say is that Green Mountain will be the exclusive partner for the production and sale of Coca-Cola-branded single-serve, pod-based cold beverages. Green Mountain also said it has the ability to collaborate with other soda brands as it builds out its cold beverage platform.

The direct investment by Coca-Cola, combined with a lack of financial specifics and a non-exclusive partnership left some Coca-Cola analysts scratching their heads.

Still, gains from the initial 10% investment may give Coca-Cola some other income, and a beneficially structured transaction could also grow the company's earnings when the partnership takes effect in 2015. Some analysts also noted that the deal could benefit Coca-Cola's bottling assets.

Green Mountain Coffee Roasters shares were gaining nearly 30% to $104.74 in Thursday afternoon trading. Coca-Cola shares were rising over 1% to $38.11.

Green Mountain's Keurig brewers could be seen as an at-home iteration of Coca-Cola's bottling operations, according to some analyst reports.

The benefits are more apparent for Waterbury, VT-based Green Mountain Coffee Roasters.

Dogged by criticism from short sellers like David Einhorn of Greenlight Capital, the company now has found about as impressive of a strategic partner as possible in Coca-Cola.

Green Mountain CEO Brian P. Kelly emphasized the importance of both firms having an investment in cold brewing. In response to fairly probing analyst questions, he also indicated that Green Mountain retained strong economics in the partnership.

"It's a strong economic prospect for us, and we're not going to go into the details necessarily of the CapEx and we're early days obviously in the cold system. But we think that we have a line of sight to a very, very high return business," Kelly said. He also said that Coca-Cola hadn't demanded exclusivity in its partnership with Green Mountain, possibly indicating an even-handed negotiation.

"Coke understands the power of the Keurig system is to have multiple brands in it and they support that," Kelly said.

In that sense, Green Mountain may have cut a smart deal, even if the price of Coca-Cola's investment is at a discount to current trading levels and the price at which it may now buy-back shares. Had they dragged their feet, maybe Coca-Cola may have had the opportunity to cut an opportunistic and one that might more closely resemble the maneuverings of its largest shareholder, Warren Buffett.

"We believe the Coca-Cola deal transforms Green Mountain Coffee Roasters from a controversial single-serve coffee company to a global beverage growth company and should put to rest many of the allegations of fraud and accounting misconduct, thereby significantly reducing the "tail risk" and supporting a higher valuation," KeyBanc Capital Markets said.

For now that appears to be the big investor takeaway. Green Mountain's cold beverage push will be more evident in the company's calendar 2015, the company said. It also allowed investors and analysts to look beyond mixed earnings.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs