But the Keurig Cold will do more than just make soda, such as dispense slightly healthier drinks like lemonade or apple juice, right?
Right. Fair enough. But once again, running cold water through a flavoring pod solves a problem that doesn’t exist. Single-serve juices and non-carbonated drinks are already available in a single-serve bottled format and/or easy-to-pour bottles, and it’s dangerously presumptuous to assume a consumer isn’t willing to scoop a spoonful of powdered drink mix into a glass of water and stir it (it’s almost as easy as making a pod-based beverage).
Indeed, many consumers would prefer to mix a gallon of lemonade at a time and keep it handy in the refrigerator. Unlike a pot of coffee, a jug of lemonade is fresh and tasty for days, and it’s bound to be remarkably cheaper on a per-drink basis.
3. The best Coca-Cola can hope for is sales-displacement rather than sales-growth.
Even assuming drawbacks Nos. 1 and 2 can be overcome, there’s still a reason KO stock investors might want to suppress their euphoria.
While GMCR has practically nothing to lose and at least something to gain here, Coca-Cola can’t exactly say the same. See, where any additional sales of the Keurig Cold device and flavor pods will bump up its top line, it’s unlikely Coke will add net sales of soft drinks. Rather, it will simply lead soda drinkers to make their fizzy drinks at home instead of buying them at a grocery store or at a convenience store.
And, in the same sense that Coca-Cola has to compete in grocery stores, Coca-Cola still will have to compete in the Keurig Cold market.
While Coke will only make single-serve pods for the Keurig device, Green Mountain Coffee Roasters is free to add as many competing brands to the ranks of cold-drink pod providers as it wants to. And worse, for KO stock owners as well as GMCR investors, if there’s no patent protection on the design of the pods (a question that’s yet to be answered), that competition will most certainly pop up and chip away at both companies’ Keurig Cold pod business.
None of this is to say the Keurig Cold device itself is going to be a failure. But, whether it’s due to be a smashing success depends on an investor’s specific definition of “smashing.”
The big question is, are Green Mountain Coffee Roasters and Coca-Cola investment-worthy now because of the partnership? Following the big 26% jump from GMCR stock, no, it’s probably not … at least not for a while.
And as for KO stock, no, the partnership doesn’t make it more appealing to investors, and likely never will.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.