By Mike Esterl
Coca-Cola Co. said Tuesday that it would increase its stake in
Keurig Green Mountain Inc. to 16% from 10% as the world's largest
beverage company deepens its exposure to coffee and countertop
carbonation.
The move comes after it signed an agreement in February to sell
its cold drinks through an at-home beverage system being developed
by the fast-growing maker of the Keurig single-serve coffee
maker.
Under February's partnership, Coke also acquired a 10% stake in
Keurig for $1.25 billion and the option to increase its stake up to
16% through open-market purchases of Keurig's common stock within
36 months.
In a statement Tuesday, Coke said it has entered an accelerated
purchase agreement with Credit Suisse to acquire shares to reach
that level.
"These incremental purchases demonstrate our continued belief
that Keurig Green Mountain has substantial growth potential," Coke
said Tuesday.
Keurig's share price rose 9% to $120.85 in early trading
Tuesday. Based on Keurig's closing share price Monday of $110.71,
Coke's additional 6% stake purchase would cost roughly $1.07
billion.
Keurig shares closed at $80.88 on Feb. 5, before Coke announced
its initial 10% stake purchase.
Shares of Coke added 26 cents to $41.08 in early trading
Tuesday.
Coke said in February it would make its global drink
portfolio--which includes its namesake cola and hundreds of other
brands including Sprite, Fanta, Minute Maid and Powerade--available
around the world through Green Mountain's KeurigCold system. Green
Mountain said at the time that the system should be available in
fiscal 2015, which begins Sept. 28.
Atlanta-based Coke is moving beyond store aisles and restaurant
fountain machines in a bid to find new consumers after its global
soda sales slipped 1% in the first quarter, the first decline in
its carbonated beverage business since 1999. Soda sales are
struggling particularly in the U.S., where industry volumes have
contracted nine straight years as increasingly health-conscious
Americans worry about the effects of sweetened drinks.
Keurig and Coke hope to swipe market share from SodaStream
International Ltd., the current market leader in countertop,
soda-making machines globally and in the U.S. But home carbonation
remains a niche market, with SodaStream only in about 1% of
American households.
Other companies are also entering the category. Bevyz Global
Ltd. plans to begin selling countertop carbonation machines in the
U.S. this year under a distribution deal with Cuisinart. PepsiCo
Inc., Coke's main beverage rival, has a minority stake in Bevyz but
has yet to confirm if it will sell its drinks through the
system.
Write to Mike Esterl at mike.esterl@wsj.com
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