SodaStream International Ltd. (NASDAQ: SODA) was initially down handily as the loser of the Coca-Cola Co. (NYSE: KO) and Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) 10-year pact for cold drinks announced on Wednesday. It sounds like incredibly bad news on the surface for a company like SodaStream. If you look for cause and effect, this could be great news for SodaStream.
The Coke-Green Mountain pact is a game-changing event. Let’s just say that the elephant in the soda industry is now in the living room. But look for effect after the cause. Who or what is left to do?
PepsiCo Inc. (NYSE: PEP) now will have to announce a move into the home as well. If Green Mountain has partnered with Coca-Cola, who does that leave in the sector? Most likely it leaves SodaStream. Starbucks Corp. (NASDAQ: SBUX) is probably not the right fit.
SodaStream shares were up 7% at $38.40 in early trading Thursday. Shares were down around $33 at what would have been a 52-week low Wednesday night. Effectively all that SodaStream may have to do is apologize about trying to name Coke and Pepsi in the Super Bowl commercial with Scarlett Johansson. Pepsi will have to move into home-created sodas after Coca-Cola’s move. SodaStream is the most likely fit.
As far as why Starbucks is not a great fit, the company’s focus has not been on carbonated beverages. Starbucks is also viewed as the elephant in the room of its own coffee accord. The deal with Kraft also will act as a possible reminder that Starbucks may want to go it alone in most business pacts.
SodaStream seems to be the logical fit for PepsiCo. That likely is what is driving shares higher. Also, keep in mind that its $750 million or so market cap is so small that anyone could strike the ultimate deal with the company. Green Mountain’s market value was closer to $12 billion, even before the gain.
The entire market value of SodaStream is effectively smaller than the 10% minority investment stake that Coca-Cola made in Green Mountain. That could make for pretty simple math reviews when you consider that Coca-Cola’s market cap is $166 billion and PepsiCo’s market cap is closer to $122 billion.