Anheuser-Busch InBev (BUD) partnering with Keurig Green Mountain coffee to develop at-home alcoholic pods is a "potential game changer," Jefferies analysts Edward Mundy and Cole Hathorn said in a note Monday.
"Around a century ago, if you wanted to drink beer at home you took your jar to a pub, it was filled from a draught keg, you took it home and had to drink it immediately," the analysts said in a note sent to TheStreet. "With the end game in beer M&A largely complete, we detect a shift in ABI's business model towards top line growth; the Keurig-JV represents first-mover advantage in the next shift in beerland."
There are still several issues the Budweiser maker will face with this venture, as TheStreet laid out earlier this year, such as will the alcoholic pods taste any good? And, what's going to happen to the Earth when it's trashed in non-biodegradable Keurig pods?
Anheuser-Busch and Keurig announced in January that they were developing a product to serve beer, liquor, cocktails and mixers at home in the same fashion as Keurig makes its coffee pods. Details on the transaction were unclear.
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If the "Keurig BEER platform can deliver a superior tasting cold beverage to packaged glass/canned beer," it could have an advantage over the Keurig KOLD soft drinks machines, Mundy and Hathorn said in the note, explaining that if successful, the in-home alcoholic system could add value of up to $5.33 a share in the U.S.
Keurig Kold machines - a similar partnership between the coffee maker and beverage giant Coca-Cola (KO) - hit stores in September 2015 at the hefty price of $369.99. The machines allowed consumers to create their own soda pods.
The soda pods didn't go over so well as in June, Keurig discontinued sales of the Kold machines. Maybe once alcohol is added to the mix, the machines will be better received.
Jefferies predicts that the beer machines could be ready for market in two to three years, compared to the six years it took Coca-Cola and Keurig to develop their system.
Still, whether the boozy pods are a success or not, the major "headwind" that still persists for Anheuser-Busch, according to Jefferies, is that millennials are generally disinterested in its beer. Sales of domestic beer are losing out to craft and imported beers in the U.S., while sales of beer in general are declining in comparison to spirits and wine.
Mundy and Hathorn estimated in their note that Anheuser-Busch's North American division - its largest market, making up 28% of profits - will continue to decline at a pace of 1% per year.
Bring on those beer machines.
Editor's Pick: Originally published March 14.