More problems for Coke: Keurig and Monster Energy lose their edge

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[FILE] 20oz plastic bottles of Coca Cola (Coke) sit on an unidentified cooler shelf.

NEW YORK — Coca-Cola is not having a good year.

Diet Coke sales have fallen worldwide. Shares of Coke are down so far in 2015 while the broader market — and top rivals Pepsi and Dr Pepper Snapple — are both up.

And now Coke has a new problem. The two companies that Coke has agreed to invest in — Keurig Green Mountain and Monster Beverage — have both tanked this week following disappointing earnings.

Keurig Green Mountain plunged 9% on Thursday and the K-Cup maker’s CEO admitted that consumers are not in love with the company’s newest machine.

Shares of energy drink maker Monster Beverage sank 9% Friday after the company reported profits that missed forecasts. It didn’t help that Goldman Sachs downgraded the stock following the results.

This is not a good sign for Coke.

One of the main criticisms of Coke is that it has not done enough to expand into more rapidly growing parts of the food and beverage business. Pepsi, for example, has a thriving snack business.

Both Pepsi and Coke are trying to do more with bottled water and tea. But coffee and energy drinks are two beverage categories that seemed to be particularly good areas for Coke to target.

That’s why Coke initially bought a 10% stake in Keurig last year and subsequently upped its stake to 16%. Coke also made a deal to buy 17% of Monster’s stock. That transaction is set to close sometime this quarter.

Now Coke investors have to be concerned that maybe the company got into both investments too late.

Keurig has to find a way to win back customers who were angered by the company’s decision to force people to only use Keurig-licensed K-Cups in its latest machine.

There is a big market for cheaper private label single-cup coffee pods that wouldn’t work on the new Keurig brewers.

It’s also worth wondering if Coke’s partnership with Keurig to start selling a carbonated beverage machine called Kold later this year will pan out or not.

The other company already in the DIY cola market, SodaStream, just reported dismal sales. Making your own soda at home may be a fad that has already peaked.

Meanwhile at Monster, Coke is partly to blame for its poor earnings in the past quarter.

Monster is shifting its distribution to Coke and was forced to take a $206 million termination charge to end partnerships with other third-party distributors.

There are also concerns that revenue growth is slowing.

Monster’s CEO said during a conference call with analysts Thursday that competitors Red Bull and Rockstar are gaining market share in the energy drink market.

It’s possible that the trend could reverse now that Monster has the backing of Coke and its global distribution machine. But if Monster loses more market share, that’s a problem.

Coke can’t continue to grow if its investments in new categories wind up being a flop.

It’s all well and good that Berkshire Hathaway chairman Warren Buffett joked at his company’s annual shareholder meeting last weekend that he’s “one-quarter Coke.”

But the Oracle of Omaha is 84 years old. Ask a millennial or a Gen Xer how much Coke (or Sprite) they drink. I can assure you it’s not nearly as much as what Buffett consumes.

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  • Jim from Canada

    Pepsi has “Throwback” products with real sugar. Coke only has harder to find Mexican Coke. Corn sweetener makes people fat because our bodies don’t know how to digest it other than make insoluble fat from it. I believe it also affects the thyroid and blocks uptake of iodine which creates reverse T3 like your body does when you are starving.

  • BearTex3

    Maybe people are starting realize how bad some of these products are. Anything that says diet on it is worse than drinking the real thing. Now there is nothing wrong with drinking the real thing as long as you dont overdo it. But that aint gonna happen because we just got to have our caffine. Plus what is healthy about an energy drink. It may give you a boost, but then when your body comes down you got to have another. Sounds like addiction. But everyone has to have them, especially kids and teens and before anyone says kids dont drink them, walk around a school someday especially jr high and high school and you will see kids drinking them. But it is not illegal so that makes it ok. And K-cups in my opinion is just a waste of time if you have one at home. Buy a coffee maker that will brew a single cup and you will save money. Or do like I do and just heat up coffee. Really saves money. Now a K-cup in the workplace would work, because no one likes to brew a pot in the workplace and for those who get their jolt from coffee and not energy drinks this is perfect. And yes soda stream probably was a trend that even I fell into, thanks to my kids. But I dont think mine has been used in a year. Just never could get the process right no matter how many times I read the directions and it just never tasted the same as a PEPSI.

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