Important deals: Coca-Cola’s inorganic growth strategy



Key deals

The Coca-Cola Company (KO) is entering into key partnerships that will help it expand its portfolio in growing beverage categories and reduce its dependence on regular carbonates, which have been losing popularity over the years.

Key partnerships

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Partnership with Green Mountain

In February 2014, Coca-Cola purchased a 10% stake in Keurig Green Mountain, Inc. (GMCR), manufacturers of the Keurig cold at-home beverage system, for $1.25 billion. The company later announced its intention to increase its stake in Keurig Green Mountain to 16%. Under the agreement, Green Mountain and Coca-Cola will together develop Keurig cold machines. This partnership will provide Coca-Cola’s consumers the convenience of having ice-cold Coca-Cola beverages at home through Keurig’s home carbonation machine.

Coca-Cola then extended this agreement to include its select brands on Keurig’s existing hot brewing system, the first being Honest Tea, the company’s leading organic bottled iced tea.

Deal with Monster

In August 2014, Coca-Cola announced that it will acquire a 16.7% stake in leading energy drink maker Monster Beverage Corporation (MNST) for $2.15 billion. Under the deal, Coca-Cola will transfer to Monster its energy drinks business, including brands like NOS, Full Throttle, Burn, and Mother. Monster will transfer to Coca-Cola its non–energy drink business, which includes brands like Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade, and Hansen’s juice products.

This deal will strengthen Coca-Cola’s presence in the popular energy drinks space and help Monster leverage Coca-Cola’s extensive distribution network.

Deals of peer companies

In October 2014, PepsiCo, Inc. (PEP), entered into an arrangement with Sodastream International. PepsiCo’s limited flavors will be available for a short time on SodaStream machines.

In November 2014, Dr Pepper Snapple Group, Inc. (DPS), completed its acquisition of the Davis Beverage Group and Davis Bottling Co. The acquisition builds on Dr Pepper’s glass package manufacturing and offers distribution control of key brands like 7UP, Snapple, A&W, Canada Dry, and Sunkist.

You can invest in companies like Coca-Cola and PepsiCo through exchange-traded funds (or ETFs) like the SPDR MSCI World Quality Mix ETF (QWLD) and the Consumer Staples Select Sector SPDR ETF (XLP).


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