SodaStream Threat: Real or Perceived?

NACS Online
June 10, 2013

Analysts say the at-home soda maker is a “disruptive force” in the soft drink industry.

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NEW YORK – Israel-based SodaStream International, maker of at-home soda machines and syrups, is making a splash in the soft drink industry.

Late last week, PepsiCo squashed reports that it was in talks to buy SodaStream International. “But maybe Pepsi should think twice about SodaStream and its fast-growing network of countertop appliances that turn tap water into fizzy drinks,” writes Bloomberg BusinessWeek.

The news source continues that SodaStream is arguably the most disruptive force in a soft drink industry dominated by Coca-Cola and PepsiCo. During the Super Bowl, SodaStream ran an ad that positioned itself as the alternative to the soft drink brands, and the company repeatedly highlights the environmental advantages of its reusable containers and cartridges.

Even if the company isn’t making huge waves in the U.S. market yet, business is flowing for the start-up — SodaStream has averaged a 33% annual revenue gain in the past five years and posted a profit in each of those periods. “At a meeting with investors last month, the company said 6.5 million households around the world actively use its machines and set a target for $1 billion in revenue in 2016,” writes the news source.

Barclays came out with a report that suggests it makes “strategic sense” for PepsiCo to buy SodaStream, noting that the Israeli company “has well-protected barriers to entry and is ‘clearly not a passing fad.’”

The biggest challenge so far for SodaStream is distribution. It’s now in 15,000 U.S. stores, including Walmart, “but that took years of work and a lot of marketing dollars,” PepsiCo could help “unlock a lot of value” by leveraging its vast distribution network.

The news source continues: If Pepsi bought SodaStream, and DIY soda became a major part of the market, Pepsi would have the No. 1 player in the game — and even if homemade pop continues to slowly sip at the beverage market, Pepsi would turn a profit on the business.”