Stifel Lays Out Impact of Keurig Cold on Green Mountain, Coca-Cola, SodaStream
Keurig Cold will allow consumers to brew drinks like Coca Cola Classic from home. Analyst Mark Astrachan expects a “2H15 introduction” of the new system in the U.S. market.
Astrachan believes the new system is worth $28 per share for Green Mountain, “assuming 12% U.S. household penetration by FY20, compared to the 17% estimate of Keurig Hot penetration at the end of FY13.”
The analyst maintained a Hold rating on Keurig Green Mountain shares as the “cold system contribution offsets worsening hot system fundamentals.
Astrachan believes Coca Cola “can generate at least a 15% annual pretax return on its $1.25 billion investment in Green Mountain if Keurig Cold penetrates 3-5% of North American households."
Coca Cola shares were also maintained at Hold, “viewing multiple unattractive versus cash flow power,” said the Stifel analyst.
SodaStream, which Astrachan rates as a Sell, will suffer because of loss of shelf space, which will “create consumer and marketplace confusion, and accelerate already high churn rates.” The analyst also said, “additional promotion and higher marketing expense is the only defense suggesting a structural challenge for SodaStream margins.”
Major beverage players are unlikely to view SodaStream “as a key strategic partner,” because of “per unit economic comparison to Keurig and current soft drink margin structures,” said Astrachan.
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