Keurig Brings the Heat to Dr Pepper Snapple's Online Strategy

VP Market Insight

Keurig is going to pay $19 billion in cash to Dr Pepper Snapple investors, making this the largest non-alcoholic drinks acquisition on record. Several reporters and analysts say they aren’t sure why this deal makes sense, but from our standpoint, we see clear reasons why this acquisition can generate success online.

Dr Pepper Snapple has a great brick-and-mortar distribution strategy, but online they’re struggling in the soft drink category. The Dr Pepper brand ranks fifth on sales over the last 12-months within the 1010data online soft drink category. This is likely the result of the brand’s 3.7% conversion rate, which is much lower than the category average of 7.7%. Competitors, such as Coca-Cola and Pepsi, have above-average conversion rates at 13.3% and 8.2%, respectively.

Online Soft Drinks Category 2017 Summary

While Dr Pepper Snapple is sorting out issues online, Keurig appears to have a solid strategy in place. The coffee maker's Keurig and Green Mountain brands lead the online coffee category by double digits. This doesn’t even include many of the other brands Keurig owns within the coffee category. Furthermore, the Green Mountain brand has a high conversion rate of 12%. Strong sales combined with high conversion indicate Keurig is implementing the right advertising and pricing strategies online.

Dr Pepper Snapple will quickly be able to tap into the online success and growth Keurig has seen online. If the acquisition proves to be a success for Dr Pepper Snapple’s online strategy, it may open the door to more acquisitions, further growing Keurig’s position in the soft drinks category.

Will this deal work for both companies? Only time will tell, but there are some clear connections between these brands as they push to get as much of the consumer's hot and cold stomach share via a broader online presence.