1. Coke is entering home carbonation with GMCR as a partner. We don't know gmcr's technology CO2 most likely vs zeolite less likely given technical challenges.
2. Pepsi is entering home carbonation. We know it won't be with GMCR due to coke's exclusive contract with GMCR.
3. The only technology available to Pepsi is CO2 cylinder exchange.
This raises the question as to how Pepsi will proceed. Will they attempt to build their own refill network? Not likely. Pepsi has announced they are working with partners to develop home carbonation. They have been working in this for 12 months (almost corresponds with prior Pepsi and Soda rumors).
The most obvious thing for Pepsi is to pick the best partner that can help them fulfill CO2 exchange. Is this why the rumors were swirling last summer regarding purchasing just Sodastream's CO2 network?
Why do you think pepsi needs soda. Is it because of the co2. If so just google airgas and pepsi you will find drivers needed for pepsi. Now these are probably outdated needs but the point is pepsi already as a dist. system for co2. All they have to do is scale down the tanks. Is it for the machine? Maybe. Soda does have a good design. Is it for cheap investment like KO made on GMCR? Maybe
No IMO. PEP is screwed. Look at their chart. Growth rate anemic, Unhealthy soda sales in US decreasing and their "health campaign" is like Altria selling safe smokes. Even their food s #$%$.
Sentiment: Strong Buy
GMCR's agreement with KO is NOT exclusive. Read the transcript of their CC and see that they were very clear on that point. GMCR stressed that they will have many partners.
An analyst even asked a question about partnering with PEP (referring to them as the "blue" company) and the CEO did not rule it out but only made a statement something to effect that they don't discuss potential partners.
GMCR's Investor Presentation in the Fall of 2013 lists 24 competing coffee brands as partners and they just added Krispy Creme this week. Their recent CC call made it clear that they have the same vision for Keurig Cold.
Burgh - I have a different take away from the conference call. There were two instances where GMCR CEO Brian Kelley was asked about exclusivity regarding the KO deal. In the first, Akshay Jagdale of KeyBanc asked if it was right to think that KO was exclusive to GMCR but that GMCR was free to sign other brands. Kelley responded, "It is, it’s although it’s we are going to bring on the best brands" (horrible syntax in the original). I think Kelley's difficulty in answering the question was that he didn't want to reveal that KO would not allow PEP access to the GMCR platform. Qualifying his affirmative answer with "bring on the best brands" tells me that the only cola that GMCR will be dispensing is KO.
The second instance was when Jonathan Feeney asked Kelley if GMCR was free to sign KO's "largest national competitor that has blue trucks" (obviously PEP). Kelley deflected the question by saying that they were not going to talk about other brands or future partners, but that it was their intention "to have a multi-branded, multi-partner platform." When Feeney pressed Kelley by asking if it was fair to say that no brands or partners were excluded by the GMCR/KO deal, Kelley responded by saying "we won’t even talk about that." Kelley said that GMCR will have the decision who they will partner with, but again qualified it by saying that only "bring in the best brands." With KO owning 10% of the company (and maybe more in the future), I think it will be impossible for GMCR to bring PEP as a "best brand."
I think Kelley's failure to say whether PEP will have access to the GMCR platform is based KO's refusal to allow its arch competitor (they didn't call them "The Cola Wars" for nothing) to generate revenue from their $1.25 billion investment. To acknowledge that would only serve to spotlight SODA as a player in the home-carbonation space and as viable partner for PEP. GMCR's KO deal was ready for its close-up and didn't want to share the stage with SODA.
Sentiment: Strong Buy
Good recap at the beginning of this stream. Raised good points for consideration.
I highly doubt PEP will be a future partner with GMCR given the 10% ownership by KO. I think KO will be pretty adamant that the Blue system will be out. Also, given KO ownership, that could eventually go up to 16%, I`m not sure Nooyi and team would be enthusiastic to money in KO's coffers with PEP products. I believe the reference to other partners was referencing DPS and other potential beverage partners (including current SODA partners).
All majors are going to have to figure out how this will work with their bottlers. The distribution systems, both US & worldwide, that KO, PEP and DPS have in place will provide a major advantage when fully ramped up against this in-home carbonation channel. Go to market strategy with bottlers buy-in will be a key.
Comparing comments made by DPS CEO and PEP CEO, it appears DPS will sit back and utilize their existing relationships with KO & PEP for future licensing in the in-home carbonation channel. I don't see a need for them to go it alone. Their fall back will always be that they can ultimately license with SODA assuming the bottlers are adequately compensated for the potential incursions into their exclusive territories.
Great recap Doc. The only thing I can't wrap my head around...if these partnership discussions, collaboration efforts, testing, etc. have been going on with SODA, why does SODA run a "Sorry Coke & Pepsi" ad for the Super Bowl? How/Why thumb your nose at someone you're in active discussions with? To throw off the scent? I suppose if they ONLY singled out KO, then it would be far too obvious, but just seems odd for them to continue to lay the heat on the bigs if they're in active discussions. Thoughts?
Because they don't want to partner with either. Wanna buy us? OK, fork over a huge premium:) that we are forced to take to the shareholders. Daniel can then work for AIPAC:)
Sentiment: Strong Buy
Why? My guess is they wanted to be banned and that is why they indicated the two brands. It worked and the views on the internet were great.
Also they will continue to build the business until an agreement is signed.
Papa, I think that Pepsi may have sniffed around Sodastream last year but couldn't see a reason to do a deal and broke off talks. We'll since then and since the Super Bowl commercial.......we have Coke upsetting the status quo. Now Pepsi is back to the drawing board. As we heard. Stay tuned.
If it was fair to say PEP is even further behind KO following it's 10% investment into GMCR and PEP was smart enough to take advantage of market share in the next year before KO-GMCR product launch, what better company than "SODA" to partner, or better yet, just buy them out.
Actually I'm surprised KO only bought 10% of GMCR. The better move would be PEP buyout of "SODA"......imho
Is PEP smart enough to one up KO?
Papa- you're right on. You don't bash someone you're in discussions with. I also believe the west bank deal is a big issue for a global company. I think the issue is BS, but big firms HATE bad PR, unless the factory was moved. SODA is at a critical juncture as to whether they are a cult classic or a legitimate global beverage company.