Major companies in the soft drink industry are looking for strategic deals to expand product portfolios or to strengthen distribution networks. These alliances will help companies offset declining demand for carbonated soft drinks.
Recent Pepsi and Coca-Cola deals
In 2014, The Coca-Cola Company (KO) announced a long-term partnership with Keurig Green Mountain, Inc. (GMCR). The deal will allow people to enjoy ice-cold Coca‑Cola beverages at home with the soon-to-be-released Keurig Cold machine.
In August 2014, Coca-Cola announced the purchase of a 16.7% stake in Monster Beverage Corporation (MNST). The $2.15 billion deal will help both companies leverage their respective strengths—Coca-Cola’s bottling system and Monster Beverage’s position as a global energy player.
Under the terms of the partnership, Coca-Cola will transfer ownership of its energy business, including drinks such as Full Throttle, Burn, and Relentless, to Monster Beverage. Monster Beverage will transfer its non-energy business, including drinks such as Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade, and Hansen’s Juice Products, to Coca-Cola.
In October 2014, PepsiCo, Inc. (PEP) and home carbonation maker Sodastream International entered into a short-term agreement to test a limited number of PepsiCo flavors for SodaStream machines.
Other deal-making in the sector
In 2014, Dr Pepper Snapple Group, Inc. (DPS) acquired Davis Beverage Group and Davis Bottling Co. to enhance its distribution network.
In November 2014, Cott Corporation (COT) announced the $1.5 billion acquisition of DSS Group, Inc., parent company of DS Services of America, Inc., a leading water and coffee direct-to-consumer services provider in the US. With this acquisition, Cott, a leading producer of private-label soft drinks, juices, sparkling water, and energy drinks, will expand into growing markets. Examples of growing markets include water and coffee home-and-office delivery services, water filtration services, and retail services.
The soft drink industry is part of the consumer staples sector. You can invest in the soft drink industry with the Consumer Staples Select Sector SPDR ETF (XLP), which has notable holdings in Coca-Cola and PepsiCo.