Coca-Cola Co agreed to buy a 10 percent stake in Green Mountain Coffee Roasters Inc for about US$1.25 billion and work with the maker of Keurig coffee brewers to introduce a system for producing single-serve cold drinks.
Coca-Cola is buying the 16.7 million newly issued shares for about US$74.98 apiece, the companies said on Wednesday in a statement.
Green Mountain shares surged 45 percent to US$117.33 in extended trading.
Coca-Cola has struggled to keep consumers who increasingly shun its best-selling sodas for alternatives such as iced coffees and energy drinks.
Teaming up with Green Mountain on new beverages will help Atlanta, Georgia-based Coca-Cola boost sales, said Marc Riddick, an analyst at Williams Capital Group LP in New York.
“It’s sales growth that they themselves would not be able to access without that platform,” he said in an interview.
The move fits into Coca-Cola’s preferred strategy of taking equity stakes in promising new brands and technologies, such as Zico coconut water and Honest Tea, and helping incubate them. Coca-Cola eventually acquired all of Zico and Honest.
“This is not a zero sum game, it just provides more opportunity for our brands,” Coca-Cola chief executive officer Muhtar Kent said in a conference call on Wednesday.
Coca-Cola has the option to raise its stake to as much as 16 percent during the first 36 months, company spokesman Ben Deutsch said.
The companies are working together on the Keurig Cold single-cup beverage brewer that will be sold in Green Mountain’s fiscal 2015, which starts later this year. Green Mountain will make and sell Coca-Cola-branded pods to go with the machine.
“This is what consumers told us they wanted,” Green Mountain chief executive Brian Kelley said in the conference call.
Coca-Cola cold-drink brands are “popular,” he said.
Still, Green Mountain will partner with other cold-beverage companies to sell single-serve pods that work in the Keurig Cold, he said.
Kelley declined to discuss what other brands may be added and did not rule out PepsiCo Inc.
“We will have a number of partners and a number of brands on the system,” he said.
Jeff Dahncke, a spokesman for PepsiCo, declined to comment.
The Green Mountain-Coca-Cola partnership will ratchet up competition for Sodastream International Ltd, a Lod, Israel-based company that makes home carbonation appliances and soft- drink syrups.
Sodastream shares fell 3.6 percent to US$34.50 on Wednesday in late trading. Coca-Cola rose 1.4 percent to US$38.14.