Dive Brief:
- Keurig Dr Pepper entered into a strategic partnership with La Colombe that includes a sales and distribution agreement for its drinks and a licensing, manufacturing and distribution deal for its coffee pods.
- Keurig Dr Pepper also will spend $300 million to buy a 33% stake in La Colombe, making the beverage giant the second largest investor in La Colombe behind its majority owner and Chobani founder, Hamdi Ulukaya.
- The investment in La Colombe is the latest deal in recent years where the soda and coffee manufacturer purchases a stake in a fast-growing brand, enabling it to increase its exposure to trendy beverages and participate in their growth.
Dive Insight:
While Keurig Dr Pepper is best known for its two namesake drinks, the beverage company has moved aggressively to deepen its presence in categories increasing in popularity with consumers.
Last year was a particularly active period. Keurig Dr Pepper participated in a funding round for energy drink A Shoc. It expanded its presence in non-alcoholic beer by purchasing a minority stake in Athletic Brewing through a $50 million investment in November. A month later, the Texas-based company acquired a 30% stake in Nutrabolt, the maker of energy drinks such as C4 Energy and Xtend Energy, for $863 million.
To be sure, Keurig Dr Pepper has not been shy about buying brands it has taken an initial stake in or worked closely with for several years. It purchased premium water maker Core Nutrition in 2018 for $525 million and its predecessor purchased enhanced water maker Bai Brands for $1.7 billion in 2017.
But lately, Keurig Dr Pepper has prioritized buying stakes in companies. This lays the groundwork for a possible acquisition later on and gives Keurig Dr Pepper an opportunity to participate in the growth of the brands — much of which initially comes from the increased distribution and market expertise it brings to the smaller company.
Keurig Dr Pepper has chosen to work with brands that have developed a reputation in a particular category, like Athletic in non-alcoholic beer and now La Colombe in coffee, rather than starting its own product in a competitive and crowded beverage category.
This partnership will “drive value for both companies,” Bob Gamgort, Keurig Dr Pepper’s CEO, said in a statement. “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.”
For Keurig Dr Pepper, the investment in La Colombe gives it access to a recognizable brand in the ready-to-drink coffee space that complements its Keurig line that is more commonly associated with a freshly brewed cup at home or at the office. At the same time, Keurig Dr Pepper will incorporate La Colombe into its K-cups platform, further broadening the occasions when the premium coffee brand can be consumed and increasing its recognition among consumers
La Colombe plans to use the funds to accelerate growth and pay off its debt. Keurig Dr Pepper’s investment in La Colombe represents a multiple of approximately 3.0 times its estimated 2024 consolidated net sales, the companies said in a statement.
As La Colombe aims to expand its business, having the financial backing and the manufacturing and distribution connections of Keurig Dr Pepper will prove invaluable.
La Colombe will undoubtedly accelerate its growth faster than it would have been able to on its own, and be better positioned to compete against other established ready-to-drink products already on the market, including Coca-Cola’s Costa Coffee and PepsiCo’s Starbucks.
The transition of La Colombe ready-to-drink coffee distribution to Keurig Dr Pepper will begin in late 2023, the companies said, while the launch of La Colombe branded K-Cup pods will occur next year. The equity investment, which is subject to regulatory approval, is expected to close by the end of September.
