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The Street
The Street
Sarah Jean Callahan

Keurig Dr Pepper Partners With La Colombe

Keurig Dr Pepper (KDP) -) is no stranger to making some moves to expand its beverage portfolio and it's at it again with its latest move. Keurig Dr Pepper sits in fourth place in the soda industry behind Coca-Cola (KO) -), Diet Coke and Pepsi (PEP) -).

Dr Pepper has annual sales of $11.1 billion and Pepsi has $14.8 billion according to Newsweek.

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While the Dr Pepper brand probably won’t take down any of the top three soda brands, it has made it a priority to expand its market to compete at a different level with them. Keurig Dr Pepper bought a 30 percent market share of the energy drink company Nutrabolt for $863 million last year. Nutrabolt is known for C4 Energy Drinks, Xtend, and Cellucor.

Soda brands already in the energy drink market include both Coca-Cola and Pepsi. Coca-Cola owns Full Throttle, NOS, and Monster Energy and holds a small stake in Red Bull according to Energy Drink Hub. PepsiCo owns Rockstar Energy, Bang, Cool Attitudes and Gatorade.

Outside energy drinks, there is another group of consumers who prefer another way to stay energized.

Keurig Dr Pepper Stocks Up On Coffee

Keurig Dr Pepper just bought up a 33 percent stake in coffee company La Colombe. The investment of $300 million is a drop in the hat for Keurig Dr Pepper, but it makes them the second largest stake holder next to the founder of Chobani yogurt, Hamdi Ulukaya, according to Food Dive.

“I’m extremely excited to join forces with Bob and his team at KDP to bring La Colombe to every corner of this amazing country,” said Ulukaya of the partnership according to Bev Industry.

“I joined the La Colombe journey eight years ago because I believe in its mission, quality, craftsmanship and social impact – and that everyone deserves quality, crafted, natural coffee. With this partnership we'll be closer to fulfilling the mission of providing exceptional coffee to all.”

The deal will bring La Colombe into Keurig Dr Pepper's manufacturing and distribution. In addition, the partnership will give La Colombe access to Keurig Dr Pepper's market expertise.

The partnership brings a long-term licensing deal coupled with manufacturing and distribution for La Colombe that will service the ready-to-drink market.

Keurig Dr Pepper benefits by expanding its beverage portfolio and being able to build up the brand and its gains as the company grows. It also could lead to a possible buyout down the road having built a relationship with the company and assisting in its growth.

This partnership will “drive value for both companies,” said Keurig Dr Pepper’s CEO, Bob Gamgort. “This partnership will enable KDP to expand its reach into high growth ready-to-drink and super premium coffee segments and will meaningfully increase La Colombe’s availability to consumers.”

Distribution transition is expected to occur late in 2023 and La Colombe will launch its branded K-Cup pods in 2024.

While all systems say go, it's worth noting that this investment is still subject to regulatory approval, but if all goes well, the deal will close towards the end of September. 

Keurig is finally expanding into what should have been the obvious next avenue with its single serving coffee. Keurig K-Cups have a large chunk of the grocery aisle, and the market demands more coffee, ice cold coffee.

The iced coffee demand is higher than hot coffee according to Starbucks and Dunkin’ sales. Hot coffee is easy to make at home with the Keurig or another coffee maker, but iced coffee requires more work, finesse and it's well... complicated.

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