SodaStream Lets It Rain

It's been a busy week for SodaStream's (Nasdaq: SODA  ) PR department. The company behind its namesake water carbonation systems has issued four press releases so far this young week.

It's a tactical move, since each of the releases is simply packaging news in a way that flatters its product's benefits.

Let's quickly go over each of the four announcements, followed by my italicized thoughts on what the fast-growing pop star is trying to get across.

  • A new line of Sparkling Naturals will be available for its flagship cola, root beer, and ginger ale flavors. The syrups are 100% free from artificial flavors, colors, and sweeteners. Our non-diet flavors were already considerably healthier than Coca-Cola (NYSE: KO  ) and Pepsi (NYSE: PEP  ) . Now we rock even more.
  • It will introduce a pink version of its high-end Fizz system in October, with 5% of the proceeds going to breast cancer charity Susan G. Komen for the Cure. We care, OK? Don't go nit-picking that 5% isn't much or that we're not kicking in some coin from our pink grapefruit sodas. This is a charitable move, but we're still a business.  
  • Susan Sarandon was on hand at the International Housewares Show in Chicago, as SodaStream introduced "The Cage" -- an eco-exhibit showing how the typical family discards 10,000 empty bottles and cans over a five-year period that ultimately wind up at a landfill. We know that only 25% of you recycle, but maybe this gargantuan cage will remind you that our refillable bottles are better for the environment. Sarandon looks pretty good at 64, doesn't she?
  • The soda flavor bottles will soon switch to Bio Bottle biodegradable packaging. We've been hypocrites with our plastic syrup bottles. Even Green Mountain Coffee Roasters' (Nasdaq: GMCR  ) eco-friendly message gets tripped up with its K-Cups. We're working on it. Sarandon's watching!

SodaStream originally pitched its simple platform on cost, convenience, and variety. Who wants to lug around bottles and cans from the store? Coke and Pepsi cans add up! Haven't you always wanted to impress your friends by mixing orange soda with root beer and a splash of grape fizz?

However, it appears that SodaStream's stronger marketing traits are appealing to the health and green benefits of its slick carbonators.

It's working. Revenue soared 59% in its latest quarter, and earnings landed well ahead of Wall Street's targets. The stock has more than doubled since going public at $20 just four months ago.

This week's deluge of press releases validates SodaStream's product, but the real spin is that it's hammering home the company's benefits to justify its own status as a darling growth stock. It's at the right place at the right time, looking more fizzy than flat.  

SodaStream is taking steps to become a major consumer brand, but there's another company making all of the right moves to position itself as China's first national consumer brand. Learn more with a free special report.

Coca-Cola is a Motley Fool Inside Value selection. Green Mountain Coffee Roasters and SodaStream International are Motley Fool Rule Breakers recommendations. Coca-Cola and PepsiCo are Motley Fool Income Investor choices. Motley Fool Alpha has opened a short position on Green Mountain Coffee Roasters. Motley Fool Options has recommended a buy puts position on Green Mountain Coffee Roasters. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Coca-Cola, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Drink up!  

Longtime Fool contributor Rick Munarriz bought a SodaStream system in November and was impressed enough to buy one for his parents a month later. He does not own shares in any of the stocks in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On March 09, 2011, at 9:07 PM, jimmy4040 wrote:

    This statement:

    "The syrups are 100% free from artificial flavors, colors, and sweeteners."

    Would seem to conflict with this statement from their very own website:

    "Regular flavors are sweetened with a combination of sugar and Splenda® brand sweetener. Diet sodamix flavors contain no sugar, no aspartame and are sweetened with Splenda® brand sweetener."

    Then consider this controversy from Haaretz:

    "Following political pressure, SodaStream International is moving its manufacturing plant in Mishor Adumim to within the Green Line, according to reports from Swedish retailers who sell its goods there. But the Israeli company's CEO, Daniel Birnbaum, says he doesn't know about the retailers' announcements, and confirms that it's setting up a plant inside the Green Line - but he does not know at this stage whether production in the territories will cease"

    And it is there in Sweden that a political campaign mounted by a human rights organization has been running for about a year, that has been urging SodaStream to move its plant out of West Bank, as part of a broader drive to boycott products made in the settlements.

    In the last week, a report on production in the territories, originating with the Coalition of Women for Peace, was disseminated in Sweden. The report said that SodaStream makes all its home soda-making devices in Mishor Adumim, despite the company's assurances to the contrary to consumers in Sweden.

    The report also stated that SodaStream soda makers sold in Sweden are labeled "Made in Israel" though they are made beyond the Green Line.

    Following the report, the retail chain ICA, which sells SodaStream products in Sweden, announced that the Israeli company had told it of intentions to move its production to a new site.

    SodaStream aspires that none of its production sites be on occupied land, ICA's announcement claimed (in Swedish ). ICA further wrote that SodaStream is in the process of moving its production lines from its site in the settlements and that the process would be complete by the end of the summer.

    The company added that if it has to move its plant, it would lose tax breaks applicable to plants in the territories"

    It would appear that the statements of this company are whatever the audience would like to hear. Not exactly a confidence inspring mode

    Jump in if you want, but buyer beware!

  • Report this Comment On March 09, 2011, at 9:30 PM, LQM2 wrote:

    Considerably healthier? SODA was getting heat because they were putting Splenda in everything and artificial sweeteners were linked to stroke in a recent study. The other points are just to push their healthy good guy image, but there just appears to be a disconnect between health and sucking gallons of sugar water into your piehole.

    Yes revenue soared after they pumped what was left of that IPO money into a big holiday push. Next quarter is the big test for this GMCR wanna be...will they sell blades or will the razors be gathering dust? The BBBY display looks pretty quiet in my town.

    And its interesting that 8mm of 18mm shares unlock on 5/2 before we get that answer. Think those insiders with an average basis of $2.40 will be hanging on? Feels like "pump and dump" to me.

  • Report this Comment On March 09, 2011, at 9:32 PM, LQM2 wrote:

    Considerably healthier? SODA was getting heat because they were putting Splenda in everything and artificial sweetners were linked to stroke in a recent study. The other points are just to push their healthy good guy image, but there just appears to be a disconnect between health and sucking gallons of soda into your piehole.

    Yes revenue soared after they pumped what was left of that IPO money into a big holiday push. Next quarter is the big test for this GMCR wanna be...will they sell blades or will the razors be gathering dust? The BBBY display looks pretty quiet in my town.

    And its interesting that 8mm of 18mm shares unlock on 5/2 before we get that answer. Think those insiders with an average basis os $2.40 will be hanging on? Feels like "pump and dump" to me.

  • Report this Comment On March 10, 2011, at 8:51 AM, BusyWithFizzy wrote:

    Jimmy,

    Rick wrote about the new naturals. Your reading about the old one. Get with the program, lol. That's why it is called a press release.

    And for MrkfromMnpls, it's obvious this individual is a short seller of the stock and is panicking.

    This product was a best selling product at Bed, Bath, and Beyond. Companies with incredible selling products are not "pump and dumps."

    Also, the CEO states that the "razor blade" consumables are up each week at each vendor, week over week, since January 1st.

    Short sellers thought this was a fad at $24. Now we have seen three short squeezes in this stock and we confirmed that last quarter sales were excellent.

    If morons want to pile on more short positions, simply means another large short squeeze is coming.

    I've owned the product for 5 months now. It's amazing - never have I purchased cans of root beer or glass bottles of seltzer since purchasing this machine. Love making my own product.

  • Report this Comment On March 10, 2011, at 8:56 AM, BusyWithFizzy wrote:

    Sodastream is in 39 markets and pentration in the majority of these 39 markets is between 5% and 20%.

    The rollout in the U.S. really just started in the last quarter. If the U.S. accomplishes 5% penetration, the stock price should be around $58 to $62. More if penetration is greater. Of course, the U.S. consumes more soda than any other country in the U.S. and we like our gadgets, especially ones with ecological attributes.

    The rollout is exceeding analyst and management's expectations. Listen to the latest conference call to see this. It's on the investor relations page of Sodastream.

  • Report this Comment On March 10, 2011, at 9:59 AM, jimmy4040 wrote:

    Busy:

    Hard for a company trying to position itself as being healthier when only a few flavors are singled out. Does that mean the others are unhealthy? These "health" claims are all nonsense when referring to soda. As Mark wrote above, there is nothing healthy about Splenda.

    As I wrote above, I find everything about this company's statements dubious, and I don' exclude the financials. If you want to believe them, then go ahead and buy. It's your money.

    If you can't stand anybody else raising questions about your investment, what can I say?

    Personally I think the fact that the stock is only down 2% so far today, is also an indication something is amiss. A gadget company should be down at least twice that at the open given the market today.

    Again though, it's YOUR money. Buy more today on the dips if you want.

  • Report this Comment On March 10, 2011, at 12:41 PM, BusyWithFizzy wrote:

    No need to buy on the dips as I accumulated large amounts in the first few days of November.

    But I have to correct you again. The stock is not down 2% today. The stock is actually up 2.5%.

    Nothing dubious here except your ability to short small cap stocks without doing your due dillgence. If you keep your short position on, you will be in for a rude awakening come next quarter.

    The CEO already let you know consumables sales are up week over week at each retailer. Also, most of the 5 analysts have positive reviews of the company.

    The U.S. loves their kitchen gadgets. And a gadget company today is not down 2% but up 37%. Were you short GMCR too?

  • Report this Comment On March 10, 2011, at 2:37 PM, LQM2 wrote:

    Actually GMCR has been my most successful long ever. But SODA is no GMCR. The US loves gadgets? What they love is convenience. Single cup is super convenient compared to making a big pot of coffee with all the mess. Come to think of it, SODA is like the messy pot of coffee and soda in cans is convienent like single cup!

    Yeah, I'm short. What I don't get is why the longs aren't panicking since 8mm shares unlock on 5/2. If I liked the company I would pick up some shares after that selling deluge. But I don't.

  • Report this Comment On March 10, 2011, at 4:02 PM, BusyWithFizzy wrote:

    Your comments are evidence of a man who did not do his DD. I use my machine every other day. It is extremeley user friendly with no washing, no electricity, does not take up much counter space, etc. It's a filling a bottle with water, carbonating it by hitting a button. If you are truly short, you will learn a lesson from this trade.

    Listen to the conference call - if Soda does hit 5% penetration in the U.S., the stock has to go up from here. And they accomplish this in the majority of their markets. Also, the U.S. consumes a lot more Soda than ANY of the existing 39 markets.

    And oh by the way, the rollout in the U.S. is exceeding expectations of not only the company but the majority of the analysts.

    Any with vocal cords and eyeballs who visits the stores and talks to employees can realize this product (and the consumables) are selling extremely well.

    By talking to people, I invested and am now up 60%.

    P.S. I've shorted Sodastream when it hit resistance at $45 but these trades only lasted hours. I recommend you unwind your short.

    Regarding the insider lock up period. They won't sell much when they know consumables are going well. In fact, evidence of scant selling, when revealed, will send price higher.

    I am sure Rick, the author of this article, will discuss that when the SEC filings are out.

  • Report this Comment On March 10, 2011, at 5:35 PM, jimmy4040 wrote:

    Busy:

    You're apparently making this up as you go along, so I hope you're enjoying it.

    I have never said that I shorted SODA, nor have I ever said a negative word against GMCR, anywhere anytime.

    Finally, the stock was down two percent in early trading. If you can't find it, ask someone for help. The fact that it was up on a day like this reinforces my belief that something is not right with this stock.

    I simply don't trust the managment of this company. I am glad you made money on it. Please continue for as long as you wish.

  • Report this Comment On March 10, 2011, at 6:25 PM, LQM2 wrote:

    Well Busy, I didn't buy one, if that's what you mean by DD. I did have a so called expert demonstrate it to me at BBBY and sent soda spraying all over. I'll admit the cola tasted pretty good out of the machine, but then again Coke tastes pretty good right out of the 64 ounce bottle. Two days in the fridge the last third tastes like crap though, that's why I like cans.

    What's with the little insults anyway? If you can convince me SODA is a buy I'll cover, I don't take any of this personally. I might be wrong.

    Still, I'm with Jimmy. I don't trust these guys either. They're very slick from a PR perspective, but something doesn't add up. They did a big IPO and used most of the money to pay down debt. That's not a sign of confidence. They also used a portion to drive sales, which drove their marketing as a percent of revenue up 10%. So they pushed their product by spending money so you can't tell if the demand is real or one big infomercial. Compare that with GMCR which grew tremendously with no advertising.

    Getting to 5% penetration, or 6mm US households, would be a coup. But the US is ground zero for KO/PEP marketing wars. SBUX sat around while GMCR stole their business, I doubt KO/PEP will. Those guys are super-smart. They probably have a defense plan I can't even fathom, but at a minimum I could see them selling branded Coke/Pepsi syrup. I don't think they're worried.

    But SODA management may be. We know unit sales can be pumped with ads so next quarter is arguably their most important...will show if the razors are selling. But its just too convenient that the insiders can all get out before the release. They are sitting on almost a 20 bagger!

    Tell you what, if the stock price doesn't go down between 5/2 and earnings release I'll cover and help make you a little more money. But if it does go down I'm hanging in until after the earnings news, cause its unlikely to be good.

  • Report this Comment On March 11, 2011, at 12:39 PM, BusyWithFizzy wrote:

    Mark, You stated, "next quarter is their most impt....will show if the razors are selling."

    I can assure you that if you were out there talking to employees at the stores you would see that consumables are doing well. The CEO stated this himself.

    If you are in rural America, it would be tough to do the dd needed to unwind a short position and go long.

    If you are near big or medium sized cities, go talk to people.

    You will be suprised.

  • Report this Comment On March 11, 2011, at 12:42 PM, BusyWithFizzy wrote:

    As for Jimmy,

    He just loss all credibility. He is calling into question management's integrity based on no evidence whatsoever. He is a desperate short who will make information up to scare others.

    He's like a crack addict hustler on the corner of the street who used to work at Mcdonald's but got fired for stealing food at the end of the night.

    Bed, Bath, and Beyond, Williams Sonoma, Macy's, independent retailers have all reported tremendous success in this product. Jimmy likes to make it up as he goes along. Typical behavior of an irresponsible short who does little due dilligence.

    Can't wait to see him go bankrupt.

  • Report this Comment On March 11, 2011, at 1:13 PM, LQM2 wrote:

    Busy...maybe you are right about current sales levels. But like Jimmy suggests, I think it makes sense to be skeptical of management cheerleading. Do you have any objective evidence that BBBY sales of SODA consumables are going gangbusters? Unfortunately I'm not connected to any BBBY insiders like that insider trading hedge fund guy. I went to my BBBY in SoCal and stood around the display for a while. Then when I checked out I asked the clerk if they were selling a lot of Sodastream. She said, "well we sold some before Christmas, but not so much now". I realize it was only a sample of one. Even if they are selling well, which hasn't been proven, I still don't think its a good time to own because of the unlocking.

    As I was walking out the clerk goes to me "we are selling a lot of those". I said "what?" She said, "those little coffee things you're buying". I was buying k-cups.

  • Report this Comment On March 11, 2011, at 2:45 PM, jimmy4040 wrote:

    Busy:

    As I pointed out in my previous post, it is you who made up things I supposedly said or did, and now you're telling everybody what is in my investing profile. LOL

    If you have read the Haaretz story I posted, it would seem that I am not the only one who thinks managment is talking out of both sides of their mouth.

    I'm happy you have made good money. I have no financial thoughinterest whatsoever in it. For me, I'm always skeptical of investors who can't stand to even read anything possibly disturbing about their stock.

    They were certainly in the vast majority at Lehmann Bros, Enron, General Motors, Citigroup and various other spectacular busts in the last two decades.

    Good luck to you.

  • Report this Comment On March 12, 2011, at 3:07 PM, BusyWithFizzy wrote:

    Jimmy,

    You lack credibility because you try to incite fear and doubt without any real evidence. I for one am happy they are producing these machines in a region of the world where labor costs are low. I would not want them attempting to manufacture the machines in a developed part of the world. Labor costs would be four to five times the amount.

    Mark, to me it is comical that you placed a short position on a stock because you spoke to one woman. Channel checking requires speaking to dozens of employees at different stores around the country. You probably have a day job so this is not possible for you.

    You are just shorting this because you think it is unlikely a co. will have success in the U.S. with a product that has already worked in Europe. Many people assumed GMCR would fail two to three years ago. Many got burned in their short position simply because they could not or never considered doing a bit of channel checking.

    You don't need connections. All you need is to visit stores and talk to people.

  • Report this Comment On June 23, 2011, at 3:14 PM, option73 wrote:

    I think that SODA is a classic case of a stock that can whipsaw you to tears. BOTH shorts and longs can get burned as the volatility continues.

    The bears are right about: lockups ending, it could be a fad or flavor of the Month, and that the rest of the soda industry might fight back.

    The bulls are right about: people love their soda, room to grow, PE=50 better than LNKD's PE=1000 and the US loves kitchen gadgets / convenience.

    Anyone for a straddle trade?? Or perhaps it's time to stand by and wait for a trend.

    As for my personal experience, I bought mine at BBBY and I really enjoy it. The display at the store looked ravaged with open boxes and such. I'm not sure if this is a negative or if it indicates insane levels of interest.

    The health concerns can be addressed easily since - ahem - you are making your own soda! Pure carbonated water has 0 calories. People can be choosey about what syrups they buy or make one of their own. Also, flavored water techniques are available. Another possibility is using 1/3 to 1/2 the recommended syrup per liter to cut calories. Don't forget carbonated fruit juice. (This is tricky since it tends to fizz up and make a mess).

    While the bulls should be concerned about the usual reasons for stock swoons, the bears have several things to be VERY worried about:

    - What if WalMart starts selling it. OOPS!

    - What if Coke, Pepsi, Dr Pepper etc makes syrup available in small bottles - OOPS!

    - What if TV hosts start seltzering each other with SODA machines this time? Or if Oprah likes it?

    - Not to mention "blowout quarterly results".

    These events could have a "watch out above" effect. In any case, I have real difficulty betting against a product I like. "I just shorted the stock - now let's go to the store and buy lots more of the company's product - YAAAY!"

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