By Annie Gasparro and Mike Esterl 

Keurig Green Mountain Inc. signed a deal with Dr Pepper Snapple Group Inc. to sell capsules that make its sodas in Keurig's planned cold-drink machine, giving the maker of coffee and brewing machines two of the top three soda companies on a platform central to its long-term expansion plans.

The deal, to be announced on Wednesday, follows industry leader Coca-Cola Co.'s agreement last year for its beverage brands to be part of Keurig's countertop soda machines. Coke also took a 16% stake in Keurig last year. Keurig said the new deal means it will have at least 30 beverage varieties--including multiple brands from the two soda partners--for the new machine, which it expects to come out in September.

Keurig is betting the new machine will enable it to grow beyond the single-serve coffee brewers and K-Cup pods it is known for. It hopes the soda deals can give it an edge over SodaStream International Ltd., which is the leading maker of do-it-yourself carbonation machines but has struggled to secure big brands.

Code-named Geyser internally, the cold machine will use a single pod to flavor and carbonate room-temperature water that the machine chills to 38 degrees Fahrenheit in less than a minute. Keurig has been working on the technology for five years.

"The challenges are, first, making sure the technology delivers, then scaling that technology, and third, commercializing it," Chief Executive Brian Kelley said in an interview.

Keurig and Dr Pepper didn't disclose financial terms for their multiyear deal, which Dr Pepper said prevents it from sharing its carbonated drink brands with SodaStream or other countertop drink machines.

The deal could put pressure on PepsiCo Inc., the second-largest U.S. beverage company, which began a limited sales test of its drinks with SodaStream late last year but hasn't said if it plans to expand the agreement.

Coke and Dr Pepper hope Keurig's countertop machine will lure consumers back to bubbles. U.S. soda-industry volumes have fallen 10 straight years as health-conscious Americans switch to water and other drinks. Coke Chief Executive Muhtar Kent has called Keurig's technology "game-changing."

The lightweight pods make it more financially feasible to order and ship beverages online, and consumers wouldn't have to lug bottles and cans from stores. There's also the mere novelty of making their drinks at home.

"Consumers love to be able to discover and try new technology," said Mr. Kelley, a former Coke executive who took the helm at Keurig just over two years ago.

Keurig estimates its coffee brewers are used in 20 million U.S. households, and it says expanding into cold beverages will increase its international potential.--since the coffee market is too saturated in Europe and elsewhere for Keurig to make a dent. If the soda machine works and people buy it, it will also prove Keurig's worth as a technology provider.

Still, it remains to be seen whether Americans are willing to shell out what could be $200 for the machine--the company has said it may be priced at the high end of its coffee brewers--plus change for each capsule. SodaStream's machines, which start at a much lower price, are only in about 1% of American households, and its U.S. sales dropped sharply in the third quarter.

PepsiCo Chief Executive Indra Nooyi has said it's too early to predict if do-it-yourself machines will take off because it's tough to replicate the taste of drinks like Pepsi and consumers have to wait 45 seconds instead of three seconds to open a can or bottle. "People think that's 42 seconds wasted," she told an industry conference last month.

Mr. Kelley said Keurig is joining with other beverage companies for its machine and will come out with some of its own drink pods. He declined to comment on the possibility of a deal with PepsiCo Inc., which might be reluctant to sell its products to a company partly owned by Coke.

Mr. Kelley said the new at-home soda fountains will be sent to some consumers for market testing early this year while Keurig works on the equipment to mass produce them.

Write to Annie Gasparro at annie.gasparro@wsj.com and Mike Esterl at mike.esterl@wsj.com

Access Investor Kit for The Coca-Cola Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US1912161007

Access Investor Kit for Dr. Pepper Snapple Group, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US26138E1091

Access Investor Kit for Keurig Green Mountain, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US49271M1009

Access Investor Kit for PepsiCo, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US7134481081

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Coca Cola (NYSE:KO)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Coca Cola Charts.
Coca Cola (NYSE:KO)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Coca Cola Charts.