Drinking From the SodaStream Fountain

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Full disclosure: I love soda. I probably drink more than I should, and have tried unsuccessfully to cut back in the past. After this past Thanksgiving weekend, I may have found a solution to this problem, as well as a company with real growth potential.

My friend Shawn (you may remember him from this other article) had been raving about his new SodaStream (Nasdaq: SODA  ) machine and all the great soda that it made. Every new flavor was a flurry of text messages of adoration for the product, which led to a purchase of a flavor pack for my Thanksgiving visit. And after trying an assortment of flavors, I'm sold.

Won't replace the big boys, but...
As many of my coworkers can attest, I am a fan of Diet Dr. Pepper, a brand owned by Dr Pepper Snapple (NYSE: DPS  ) . I knew that SodaStream would not be able to replicate the flavor of regular-brand sodas: The cola wouldn't really taste like Coca-Cola (NYSE: KO  ) ; the Fountain Mist would pale in comparison to PepsiCo's (NYSE: PEP  ) Mountain Dew. But I was pleasantly surprised after trying Dr. Pete, the SodaStream equivalent of my favorite beverage. It was close enough to Dr. Pepper that I could see myself replacing it in the future.

Beyond taste, it is also a healthier alternative to the real thing, with regular Dr. Pete checking in at 37 calories per serving, compared to Dr Pepper's 100 calories. This is repeated over its other brands as well. Even its energy drink, which could probably be mistaken for Red Bull or Hansen Natural's (Nasdaq: HANS  ) Monster, has a third of the calories of its competitors, as well as less sugar and sodium.

Enough about the product!
SodaStream the company has had a bit of a rough patch this year, down more than 60% from its 52-week high. This is surprising to me, especially considering its recent quarterly results that showed 39% revenue growth and boosted guidance for the remainder of the year. Unlike some competitors, like Primo Water (Nasdaq: PRMW  ) , SodaStream products are available in more than 7,000 retail outlets in the U.S., compared to Primo Flavorstation's presence in only 500 Lowe's (NYSE: LOW  ) stores.

This retail presence will only help expand SodaStream's customer base here in the U.S. The company already has a strong European presence, including a presence in more than 20% of Swedish homes. If the company could reach even a quarter of the same market saturation in the U.S., it would sell nearly 6 million machines in this country. This 15-fold increase in customers would net even more profits for the company, which might make it a great buy at today's price.

A healthier alternative
I will be moving in the next few months, and one of the first things that I will buy for my new home is a SodaStream machine. Not only is the process to make your own soda ridiculously easy, the health benefits alone will make it a great purchase, especially at the volume of soda I drink. If you would like to keep an eye on all the exciting developments with this company, I invite you to add SodaStream to My Watchlist today. Using My Watchlist investors can stay current on all of the exciting news and relevant investing information.

Fool contributor Robert Eberhard holds no position in any company mentioned. The Motley Fool owns shares of PepsiCo and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Lowe's Companies, PepsiCo, Hansen Natural, SodaStream International, and Coca-Cola. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. Motley Fool newsletter services have recommended writing covered calls in Lowe's Companies. 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. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 29, 2011, at 3:57 PM, cowbore333 wrote:

    What will it take for this stock to reflect it's growth? The damn shorts rule this thing. Nothing that is happening with this company seems to get reflected in the price.

  • Report this Comment On November 29, 2011, at 4:04 PM, XMFTheGuruEbby wrote:

    If the company can keep reporting 39% revenue growth (or some such number) every quarter going forward, as well as continued growth outside its base in Europe, investors might actually start to want the stock to succeed instead of continually shorting it. Eventually they'll come around... at least in my opinion.

    Thanks for reading!


  • Report this Comment On November 29, 2011, at 4:16 PM, TheDumbMoney wrote:

    As I posted on another thread, it is trading as a Euro stock, because that's where it gets so much revenue. A lot of what is going on has to do with Euro-zone crazy-stuff therefore.

    Also, it's Israeli, with a primary factory in a settlement (where it employs numerous Palestinians), so now that it is successful in Europe, where the Palestinian issue is a much bigger societal focus than it is here in America, there is a lot of fuss over that -- specificallly over the idea that saying it's "Made in Israel" is a false-advertising lie because it's actually made in the country of "Palestine," in an "illegal Israeli settlement," and thus is helping to "perpetuate the Occupation."

    It is to the point that one major Swedish store chain has pulled it, and you have to expect this line of attack to continue. There is also major headline risk if there is an Iran/Israel war, or if the security situation in Israel/Palestine/Nod/Sumeria/Judea/Whatever deteriorates.

    Also it has been hammered as a result of the GMCR drop, for the same reasons it benefited from the rise: simplistic comparisons.

    I short, I'm way long, since revenues and EPS are going up and this does not seem reflected in the stock price, and I think the risks are a bit overblown given the potential for expansion in America and then Brazil. I'm long originally at $41.70/share, and upped share-count 133% at $28.5/share. No plans to add further at this time. As always, we shall see.



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