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Coca Cola (KO) Launches Honest Tea for Keurig Brewers

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The Coca-Cola Company (KO) recently announced that its organic bottled iced tea, Honest Tea, will now be available in K-Cup packs under its latest deal with Keurig Green Mountain, Inc. (GMCR).

Honest Tea, thus, becomes the first Coca-Cola branded drink to be available in K-Cup format for use on Keurig hot brewers in the U.S. Two flavors of Honest Tea — Just Green and Just Black iced teas — will be available in K-Cups from Sep 4 on Keurig’s retail site.

Green Mountain produces coffees, teas and other hot beverages which are sold in K-Cup and Vue portion packs. These portion packs can be used on its single-serve Keurig brewers for making hot beverages.

In order to remain competitive, especially after its K-Cup patents expired in Sep 2012, Green Mountain has formed several strategic agreements with coffee and beverage companies like Kraft Foods Group, Inc. (KRFT), Starbucks Corporation (SBUX), Unilever plc, Eight O’Clock and Dunkin’ Donuts to offer the signature hot drinks of these companies in its K-cups and Vue packs. The latest deal with Coca Cola adds another big name to its list of partners.

The Honest Tea deal comes almost seven months after Coca-Cola announced a 10-year global partnership deal (signed in Feb 2014) with Keurig Green Mountain under which the latter will exclusively make Coca-Cola branded pods for its upcoming Keurig Cold at-home beverage system that will make cold beverages. Also, Coca-Cola bought 10% stake in Green Mountain in February for about $1.25 billion and subsequently announced its intention to increase its stake up to 16%.

The Keurig Cold at-home beverage system will introduce Green Mountain to the cold beverage market which is much larger than that of hot beverage. The machines are under development and expected to be rolled out in 2015. Keurig Green Mountain claims that the cold brewers will use single-serve pods to make carbonated drinks, enhanced waters, juice drinks, sports drinks and teas just as conveniently as the hot brewers.

As regards Coca-Cola, the partnership with Keurig Green Mountain opens up an exciting new packaging format for its brands.

Both Keurig Green Mountain and Coca-Cola carry a Zacks Rank #3 (Hold).

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