By Lisa Baertlein and Phil Wahba
Feb 5 Green Mountain Coffee Roasters Inc, maker
of the popular Keurig one-cup coffee brewer, said on Wednesday
the Coca-Cola Co had bought a 10 percent stake in it for
$1.25 billion and would help launch Green Mountain's new cold
drink machine planned for release as soon as October.
Shares of Green Mountain soared 42 percent to
$114.85 in extended trading, while those of its likely new
rival, SodaStream International Ltd, retreated 3.9
percent to $34.39.
Under their 10-year agreement, the companies will
collaborate on the development and introduction of Coca-Cola
products on Green Mountain's upcoming machine that will serve
both carbonated and non-carbonated beverages, including soft
drinks, tea and juice.
Green Mountain's Keurig machine popularized the use of pods
- small packets containing everything from coffee, tea or hot
chocolate powder - for easy, in-home, one-cup brewing of hot
drinks. The company has sold more than 30 million Keurig
machines around the world for use in homes, offices and other
The deal will make Green Mountain the global exclusive
partner for the production and sale of Coke's branded
single-serve, pod-based cold beverages, the companies said.
Still, Green Mountain also retains the option to sign deals
with other cold drink makers, President and Chief Executive
Brian Kelley told Reuters.
That includes Coke rival PepsiCo Inc, which last
year shot down rumors it planned to buy SodaStream. A spokesman
for Pepsi declined comment for this article.
"We'll do deals with brands consumers love," said Kelley,
who added that Green Mountain has coffee deals with most major
chains, including Starbucks and Dunkin' Donuts
"We are really excited to start with Coca-Cola," said
Kelley, who came to Green Mountain from the world's largest soda
maker, where he was viewed as a product-savvy executive with
expertise in product and supply chain management.
Green Mountain's cold drink machine is scheduled to debut in
fiscal 2015, which begins in October this year.
Coca-Cola CEO Muhtar Kent said on the call that the deal
would give his company access to new business opportunities. He
added that it would enhance Coca-Cola's bottling system and that
its bottlers would have a complimentary role.
"This gives Green Mountain a beverage partner with some
hugely powerful global brands. For Coke, it gives them access to
some really cool, new cutting-edge pod cold-beverage
technology," said John Sicher, editor and publisher of Beverage
Sicher said soda sales in the United States have been in
decline since 2005, while growth in pod-based coffee brewing has
Under the terms of the agreement, Coca-Cola will acquire
roughly 16.7 million newly issued shares of Green Mountain. The
new shares have been priced at $74.98, which represents the
trailing 50-trading-day volume weighted average price as of
Coca-Cola has the option to increase its minority stake up
to 16 percent through open market purchases of Green Mountain
common stock during the first 36 months, a spokesman for the
The significant after-hours move in Green Mountain's stock
appeared to be a classic short squeeze as traders who bet
against the stock scrambled to cover their positions.
David Einhorn, who runs hedge fund Greenlight Capital Inc.,
was among investors with short positions in Green Mountain as of
Oct. 15. Greenlight's spokesman declined to comment to Reuters
The most recent data from Nasdaq, which dates to Jan. 15,
had short interest in Green Mountain at about 25 percent of
shares outstanding - about 37.6 million shares. That's lower
than peak short interest in November 2012, when more than 51
million shares were being shorted.
The average consumer staples company has just 1.6 percent of
shares held short, according to Thomson Reuters Starmine.
Green Mountain separately reported better-than-expected
quarterly profit on Wednesday.
The Waterbury, Vermont-based company said net income rose 28
percent to $138.2 million, or 91 cents per share, for the fiscal
first quarter ended Dec. 28.
On an adjusted basis, the company earned 96 cents per share
- 6 cents better than analysts on average had expected,
according to Thomson Reuters I/B/E/S.
Net sales rose almost percent to $1.39 billion.
Green Mountain also plans to launch a new hot drink brewing
system this fall. Called Keurig 2.0, it will use both
single-serve K-Cups and larger-sized K-Carafe packs that brew 28
ounces of coffee.