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Coke and Pepsi Looking to Invest in Chobani: Who will Win?

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Beverage giants, PepsiCo, Inc.PEP and The Coca-Cola CompanyKO , are reportedly fighting to buy a stake in the Greek yogurt maker, Chobani.

Chobani was founded by its current CEO, Hamdi Ulukaya, in 2005. The company uses only natural ingredients to make Greek yogurts. The company's first Greek yogurt cup was launched in 2007.

The investment could value Chobani at as much as $3 billion, according to Reuters which was the first to report the news. Reportedly, Chobani is looking to sell a minority stake to expand its supply chain and geographical reach of its new products. Other companies apart from Pepsi and Coca-Cola are also reportedly in talks with Chobani regarding an investment.

Both Coca-Cola and Pepsi have been investing in emerging consumer categories to diversify their product portfolios beyond sodas that are witnessing declining sales of late.

In 2015, Coca-Cola increased its stake in specialty coffee retailer Keurig Green Mountain, Inc. GMCR to 16% and bought 16.7% stake in energy drink maker, Monster Beverage Corporation MNST .

With Keurig Green Mountain, Coca-Cola has an innovative partnership under which the former will exclusively make and sell Coca-Cola branded single-serve pods for use on its Keurig Cold at-home beverage system. The deal opens up an exciting new packaging format for Coca-Cola's brands. Under the deal with Monster, Coca-Cola swapped its global energy drink business with the former's non-energy drink business. These strategic investments will help Coca-Cola adapt to changing consumer trends while accelerating innovation.

In addition, Coca-Cola has a 50% equity interest in Aujan Industries Company, one of the largest independent beverage companies in the Middle East.

Pepsi is also exploring newer categories like dairy with the Wimm-Bill-Dann acquisition in Russia, a joint venture (JV) with Almarai in the Middle East and the Muller Quaker Dairy JV in the U.S.

Growing health and wellness consciousness - consumers are particularly vigilant about the use of artificial sweeteners, high sugar content and related obesity concern - is hurting the sales of carbonated beverages of Coca-Cola, Pepsi and Dr Pepper Snapple Group, Inc. Among carbonated soft drinks, the cola segment, in particular, has come under fire as consumers are opting for alternative beverage offerings. The diet colas are also under pressure due to increasing consumer concern regarding the use of artificial sweeteners.

Acquiring a stake in Chobani should help the beverage giants to gain from the growing demand for yogurts as Americans become increasingly health conscious. However, we believe the investment would prove more beneficial for Coca-Cola as it is solely focused on beverages. On the other hand, rival Pepsi's massive snacks business - accounting for just over half of the sales - gives it the much needed diversification.

Both Pepsi and Coca-Cola have a Zacks Rank #3 (Hold).

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COCA COLA CO (KO): Free Stock Analysis Report

PEPSICO INC (PEP): Free Stock Analysis Report

KEURIG GREEN MT (GMCR): Free Stock Analysis Report

MONSTER BEVERAG (MNST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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