Recently I came across an announcement that Coca-Cola is partnering with Green Mountain Coffee Roasters to sell Coke products as part of Green Mountain’s new home beverage system slated for a release later this year. For those of you who aren’t familiar with Green Mountain, they make the popular Keurig in-home single-serving coffee machine (which became a popular home and office item after Nespresso’s patents expired). Now they want to expand their in-home beverage machine product line to include cold beverages. What is not clear in the press release is which of Coke’s products will be available with this new beverage system.
Will it only be beverages like Minute Maid juices, Powerade, Vitaminwater and non-carbonated beverages in their portfolio?
Or will it include the Coca-Cola crown jewels – Coke, Diet Coke, Sprite, etc.?
The only thing that is mentioned is that the system will not contain a carbon dioxide cylinder that needs to be changed periodically (something the Sodastream system requires).
So, what is driving Coca Cola to pursue this $1.25 Billion investment in Green Mountain Coffee Roasters in search of innovation?
Well, there are many different reasons why companies seek to innovate.
In Level 1 of the Global Innovation Certification we refer to this as Innovation Intent, and I am currently recording the fifth video module from two full days of live certification training materials for the Level 1 Innovation Certification eLearning, and this video module happens to be about innovation intent.
Some of the reasons that companies look to innovate can of course include:
- An ambitious leader
- A changing regulatory environment
- A changing competitive environment
- A desire for new growth opportunities
- Faltering company financials (burning platform)
- A need for competitive response
- Requests from customers
- Recognized new supplier capabilities
- Demands from shareholders
- Requests from passionate employees
- INSERT YOUR REASON HERE
So what is going on here for Coca-Cola?
Well, competitor Sodastream recently splashed out $4 million for a Super Bowl advertisement (during a game that our local Seattle Seahawks won) and has been growing steadily (while still small compared to Coca-Cola). But it does have a market cap of $780 Million and a growing fan base. But, at the same time, Coca-Cola is investing $1.25 Billion for 10% of Green Mountain Coffee Roasters. Why are they investing more than $1 Billion in this interesting, but still comparatively small segment of the beverage business?
Is this a smokescreen move, announcing a product that may never see the light of day, in order to dent the growth of an emerging competitor?
Is it a competitive response, a hedge, with a me-too product in case the home soda bottling movement continues to grow?
Is it just a logical doubling down for Coca-Cola in a belief that the beverage personalization trend has not exhausted itself yet, and building upon the success of the Coca-Cola Freestyle and the groundwork that Sodastream has done to seed the market for Coke?
Or has Green Mountain Coffee Roasters, with its massive distribution channels (in comparison to Sodastream), brought Coca-Cola something that truly represents an innovation in the beverage system market versus the Sodastream offering that might result in people switching and both gaining back market share for Coke in their core markets, while also potentially representing an opportunity for some of their less successful brands to gain traction in a space where they don’t have competition from Pepsi?
This of course would be the more interesting of the strategic undertones, and the one in which Pepsi, not Sodastream should be the most worried.
Because after all, in the minds of Coca-Cola executives, it is Pepsi that they are always most worried about, not someone like Sodastream, and anything that allows them to potentially steal market share from Pepsi, makes them very happy indeed.
What are the motivations behind this move and partnership, which direction will all of it go, and is there any real innovation happening here?
And what will Pepsi do?
I guess we will have to wait and see.
Meanwhile, ask yourself what your innovation intent is, and…
For more information check out this analyst discussion