Green Mountain Coffee and Coca-Cola: Taking Their Fate Into Their Own Hands
By: Nicole Urken
| 02/06/14 - 04:59 PM EST
NEW YORK (TheStreet
) -Time and again, the companies that are true winners are the ones that have taken their fate into their own hands versus sitting back.
Think about VF Corp (VFC)
, which has been able to acquire and grow its acquisitions of North Face (2000), Nautica (2003), Vans (2004), Kipling (2004), Reef (2005), Seven For All Mankind (2007), lucy activewear (2007), Splendid (2009), and Timberland (2011). Or Hain Celestial (HAIN)
who has grown via Tilda, Ella's Kitchen, Blue Print Cleanse, Greek Gods and more. Think about PVH Corp PVH acquiring Calvin, then Tommy and Warnaco. Or the many acquisitions of Pinnacle Foods (PF)
, B&G Foods (BGS)
and Jarden (JAH)
But today we got a merger where the two individual companies needed one another. Green Mountain (GMCR)
and Coca-Cola (KO)
. Coke announced a ten-year strategic partnership with Green Mountain for $1.25bn. Under the agreement, the two companies will collaborate to produce and sell pod-based cold beverages through the Keurig Cold system, which is expected to launch in 2015. This puts some pressure, of course, on SodaStream (SODA)
First, you ask, why does Green Mountain need Coke? Green Mountain needed Coke's brand equity, distribution and marketing prowess, particularly given increased competition in the single-serve market and as growth for the high multiple company was slated to slow as Herb Greenberg points out
And does the $165bn market cap soft drink mega company really need Green Mountain? Turns out the answer is yes. Declining soda sales in the US have created investor worries. The consumer soft drink (CSD) category is challenged, given regulatory pressure on sugary sodas and shifting attitudes about health. And Coke is essentially 100% beverages versus Pepsi (PEP)
which gets 60% of its profit from Snacks. And while emerging markets have been the hope for Coke shares, growth has decelerated. The partnership wtih Green Mountain creates an opportunity for the company to reshape consumer perceptions.
A win-win and two companies creating value via combination.
--Written by Nicole Urken in New York.
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