Chatter: Analysts react to the Keurig-Dr Pepper takeover

Can the new entity overtake Coke or Pepsi?

Keurig announced Monday it had acquired Dr Pepper Snapple Group in a cash deal worth US$18.7 billion.

The new beverage giant -- called Keurig Dr Pepper -- puts brands such as 7UP, Snapple, Mott’s, Sunkist and Keurig coffee under one roof.

“We have a really wide portfolio of brands, we’re able to address almost every consumer need in every format and ... to reach every point of sale,” Keurig chief executive Bob Gamgort told Reuters.

“If you want to win in the beverage industry you need a portion of your portfolio that gives you significant scale and then you need to be able to layer in higher growth segments,” he said.

Here's what analysts are saying about the deal:

Bloomberg Intelligence analyst Kenneth Shea

“The market is rewarding growth, whether it’s organic or through acquisitions." In food and beverage, the companies "that are doing the best are the ones that are making bold acquisitions. They’re doing something about the sluggish environment."

Macquarie's senior beverage analyst Caroline Levy 

The company is still vastly outsized by PepsiCo and Coca-Cola, which had sales in 2016 of $63 billion and $41 billion, respectively. But Levy said she expected the new company’s distribution capabilities and combination of hot and cold offerings to give it a competitive edge. “It’s always been a two-horse race with Coke and Pepsi,” she said. “I wouldn’t be surprised to see this entity pull ahead of Pepsi in the beverage business.”

Sanford C. Bernstein analyst Ali Dibadj

“I agree with the fact that consumers are drinking and buying their drinks differently it is too early to tell whether this deal makes sense . . . Clearly, the opportunity here is to expand the reach of the ready-to-drink coffee business on the Dr Pepper distribution system. The idea is to put faster-growing coffee alongside slower-growing categories on the same trucks to help cost-savings.”

Jason Moser, an analyst with Million Dollar Portfolio at The Motley Fool

“This merger is really interesting in that it brings together two brands/companies that consumers are very familiar with on their own, but perhaps what these brands do better than anything is partner with other really popular and successful brands,” Moser added. “Dr Pepper Snapple has a large portfolio of offerings beyond just soda.”

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