Analyst: Coca-Cola "fully engaged" in GMCR, sees value in single serve

Today’s news that Coca-Cola (KO +0.6%) has increased its equity position in Keurig Green Mountain (GMCR +7.5%) to 16% from the original 10% purchase leads Canaccord analysts to believe that KO favorably views GMCR's positioning and growth opportunity in coffee, and has confidence in the upcoming Keurig Cold launch.

Regardless of the timing of adding to its stake, Canaccord says the move illustrates the value in single-serve and with Coke as a 16% holder, "the strongest potential partner in cold beverages is fully engaged" with a significant material interest in the upcoming Keurig Cold launch, and the stake also could boost GMCR's valuation reflecting the addition of a premium over the speculation of a future take-out by KO.  

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Comments (7)
  • duhaus
    , contributor
    Comments (320) | Send Message
    I would consider Coke going all-in infinitely more significant than any analyst's opinion or upgrade/downgrade. Long GMCR
    13 May 2014, 04:33 PM Reply Like
  • baerrus
    , contributor
    Comments (600) | Send Message
    I must be missing something. What is the point of buying $100 machine to get a soda beverage prepared. IF one can pull a can from the fridge? And that one from the fridge costs $0.40 per can.
    13 May 2014, 04:48 PM Reply Like
  • markb
    , contributor
    Comments (583) | Send Message
    Yeah, you're missing something. KO got their nose under the tent and they like what they see so much they're pulling the trigger on the option at an average of maybe $106 cause they see it going higher. Its a little about K Cold but mostly about coffee.
    13 May 2014, 05:08 PM Reply Like
  • benitus
    , contributor
    Comments (3473) | Send Message
    KO's increasing its stake in KGM is only a business decision, which doesn't mean anything earth-moving will come from this "event", except for traders taking advantage of this development to rake in their profits by pumping up the price and then dumping on the stock, like they always do.
    13 May 2014, 05:35 PM Reply Like
    , contributor
    Comments (5167) | Send Message
    KO has a new expanding plan for increasing revenue and bottom line and GMCR is becoming an integral part of this. They increased their % to the current max allowable.
    Good move KO.
    13 May 2014, 07:15 PM Reply Like
  • slam stocks
    , contributor
    Comments (1454) | Send Message
    I like this deal.


    Keurig machines sell and distribute through Starbucks locations. A deal to expand their beverage business would indirectly market into higher income clientele that likely already purchased the machine.


    KO has deep pockets and declining business. New products are needed and this would be a very low risk and high reward deal. The loser would be Sodastream being shut out of Starbucks and selling drinks that require expensive and highly dangerous CO containers.
    13 May 2014, 09:25 PM Reply Like
  • banmate6
    , contributor
    Comments (1550) | Send Message
    @slam stocks


    I completely agree with you here. There will continue to be pressure on carbonated drinks. KO is wisely diversifying, as it explores ways to possibly make flagship Coca-Cola drinks healthier...maybe they lose the HDC, go to raw cane?


    KO has been a monster stock for me since I bought in 2006. I added not to long ago, experiencing the nice latest run up. I'm more confident now that it is better situated for future growth with this investment. As you said, they're leveraging their balance sheets.


    By the way, I think this might be the end of the road for SodaStream. I can't see anything but an acquisition in their future.
    13 May 2014, 10:56 PM Reply Like
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