Coca-Cola’s polar bears might be switching from Coke to . . . fermented tea that includes something called scoby?

As it cultivates its next generation of consumers, many of whom shun sugary beverages like Coca-Cola’s flagship drink, the company has invested $20 million in kombucha producer Health-Ade. The deal for the health drink occurred in May, according to Acuris’ M&A research platform Mergermarket, which cited unidentified sources.

Health-Ade, based in Torrance, California, is the third-largest U.S. kombucha producer, behind PepsiCo’s KeVita and GT’s Living Foods, Mergermarket said. The soda giant had invested in Health-Ade in 2014 through First Beverage Ventures, a limited partner of Coca-Cola’s Venturing & Emerging Brands division.

Coke sees a bright future in the probiotic drink. Last September it bought Australian kombucha distributor Organic & Raw Trading Co., which makes MOJO kombucha drinks. 

Coca-Cola has been pivoting and cultivating younger drinkers for decades as tastes change, beginning with Diet Coke in 1982 to the launch of Dasani water in 1999. Recently purchases include sparkling water company Topo Chico, cold-pressed juice producer Suja and this year’s $4.9 billion deal for coffee chain Costa Coffee.

  • Carbonated soft drink sales have been on the decline for over a decade, and health and wellness drinks, such as kombucha, coconut water and bottled water, are picking up. 
  • Wellness beverages now make up 41.4% of the overall U.S. beverage market after growing at a 3.6% annual rate since 2012, according to a report from the Beverage Marketing Corporation.
  • In December 2018, Coca-Cola’s biggest competitor, PepsiCo, acquired SodaStream International, which enables consumers to make seltzer water at home. It also purchased protein beverage company Muscle Milk in February of this year. PepsiCo also launched its own sparkling water line, Bubly, in February 2018.
  • Alcoholic beverage giants are also diversifying through non-alcoholic alternatives. Beer conglomerate Molson Coors, for example, acquired Clearly Kombucha in June 2018, and it holds a minority stake in the chai tea company Bhakti Inc.
  • Karma Take: As consumers shun sugary sodas in favor of sparkling waters and healthier wellness-oriented alternatives, beverage producers will need to diversify to remain attractive to investors. Even if it includes scoby (symbiotic culture of bacteria and yeast).