Keurig Kold: Down But Not Out For Coca-Cola

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On June 7, it was reported that the Keurig Kold machine will come to a disappointing end. Customers will receive a refund for their machines because the pods will no longer be available. Coca-Cola (NYSE: KO) loses a much needed avenue of distribution for its products as it faces headwinds from the healthy lifestyles movement.

Carbonated soda demand volume has fallen steadily since 2004. Coca-Cola needed all the help it could get. However, it wasn’t a total loss for Coca-Cola nor is the concept totally dead. Let’s examine what happened and what the future holds for making cold soda beverages at home.

High prices

Keurig and Coca-Cola quickly discovered that consumers didn’t want to pay $300 plus for a machine that makes something easily purchased at the local grocery or convenience store at a much lower cost. In contrast, Keurig’s rival SodaStream (NASDAQ: SODA) sells machines that dispense similar beverages for less than $200, according to CNN.

Retailers stopped carrying the Keurig Kold machine in April. I believe the final consumer viewed the machine as an expensive novelty unworthy of their hard earned dollars. I can’t say that I blame them. Why would they pay for an expensive machine that dispenses a beverage that could harm their health over the long-term?

Not giving up

The good news for the shareholders of Coca-Cola, and the owners of Keurig, is that they are not giving up on the home brewing market. Both companies hinted that they learned from the partnership. Hopefully, the two companies will go back to the drawing board and design a cheaper system. Perhaps Coca-Cola could come up with some brands and beverages that are exclusive to a future machine?

CNN reports that Coca-Cola came away with a $25 million consolation prize when JAB Holding bought its equity stake as Keurig went private earlier in 2016. This represents a drop in the bucket compared to the $1.5 billion net income registered by Coca-Cola in the most recent quarter.

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William Bias (stockdissector) owns shares in Coca-Cola. He is not a financial advisor. Always seek a second opinion and do your own research.

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Comments

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Joe Economy 3 years ago Member's comment

Great article, thanks. The market place always has a way of weeding out poor value for money products and the Keurig coffee machine is a good example of that. Home brew coffee machines are a great idea but the pricing had to be right to make it a good option. Soda stream machines on the other hand have always appealed to the convenience factor of the consumer. After all, who wants to schlep heavy bottles of soda home every time they shop? In terms of Coca Cola, sure its a loss for them that Keurig has flopped but I wouldn't be too worried for Coca Cola. with revenues of approximately $43bn last year and a market cap of about $195bn the execs over at Atlanta, GA won't be losing too much sleep I imagine.

William Bias 3 years ago Author's comment

Hi Joe Economy,

I agree 100%. Thanks for your readership!

William

Oil Baron 3 years ago Member's comment

Personally, I'm a fan of Soda Stream and everyone I've recommended it to, loves it. I think $SODA will do well. But I have to say, I'm impressed #Keurig is issuing refunds. It's of course the smart move from a customer retention perspective, but many companies wouldn't have bothered.

Ayelet Wolf 3 years ago Member's comment

Yes, but a LOT of customers likely won't have their receipts anymore and/or gave the item as a gift. They'll be out of luck and pretty angry to boot.

Oil Baron 3 years ago Member's comment

I would think with a machine that expensive, a serial number would be enough to prove ownership.

Cynthia Decker 3 years ago Member's comment

Nope, both are needed: http://www.drinkmakerrefundprogram.com/

William Bias 3 years ago Author's comment

I think all receipts should be e-mailed. This is proof of that necessity.

Alexa Graham 3 years ago Member's comment

While obviously how to get your money back was not the point of the article, it seems to me, having the actual unit with a unique serial number should be proof enough. I know I rarely keep receipts.

Dhaval Shanischara 3 years ago Member's comment

Most food and beverage companies are like rubber bands, even with enough stretching and twists and turns, they will bounce back, and i expect nothing less from Coca-Cola, especially since they belong in an oligopoly and have many more products to rely on. Great read.

William Bias 3 years ago Author's comment

I appreciate your readership!

William