What's going on?

On Monday, coffee company Keurig Green Mountain said that it would acquire soda maker Dr Pepper Snapple, creating a new, combined company worth more than $30 billion.

What does this mean?

Keurig was acquired in 2016 by a group led by JAB Holding, a German investment company that�s spent the last few years gobbling up a variety of food and drink brands in the US, including restaurant chains Krispy Kreme and Panera Bread. Keurig is perhaps best known for its single-serve coffee pods, while Dr Pepper Snapple serves up the sort of cold beverages filling the fridge at the corner store.


Under the terms of Monday�s deal, the two companies will come together to form Keurig Dr Pepper, with the stock trading publicly but JAB the majority owner. The idea is that consumers are less fixated on the difference between hot and cold drinks than the companies that make them � and that, ultimately, the $600m synergies achieved will help JAB gain ground(s) on rival Nestl� (tweet this), the world�s largest food company.

Why should I care?

For markets: Dr Pepper just got popular.

Under the terms of the deal, Keurig is paying Dr Pepper shareholders a special dividend of over $100 per share; Dr Pepper�s existing shareholders will also own 13% of the new, combined company. The stock surged a fizzy 24% following the news.

The bigger picture: The devil�s in the distribution.

One of the key attractions of this merger is its potential to unite Dr Pepper�s delivery model, which services smaller convenience stores particularly well, with the clout Keurig carries with the big chains and online retailers. Drinks companies nowadays need to be able to innovate at speed to keep up with fickle consumer tastes. If the combined Keurig Dr Pepper can catch a consumer�s eye at the corner store with its new iced coffee concoction and then sell them a multipack at the supermarket, that�s a powerful one-two punch.