Shareholders of SodaStream International (NASDAQ:SODA) may have been caused undue worry by Wall Street after the company posted third-quarter earnings recently. Various pundits struck fear into the hearts of investors by quickly pointing out slowing flavor sales in the United States after the report. The problem is, SodaStream results don't accurately reflect what's happening with its products on the store shelves in the U.S.

While flavoring sales at the company were down 2.6% in the U.S., sales for flavoring at retail locations were actually up 53% for the quarter. In all actuality, and contrary to the pundits, it appears the U.S. consumer is slurping up flavoring at an alarming rate. So why the huge disconnect between the company's results and retail activity?The confusion around SodaStream's results centers around two industry terms: sell-in and sell-out, and retail inventory management. 

SodaStream's results are expressed as sell-in numbers, while actual retail activity is referred to as sell-out, and is provided by the NPD Group. NPD has reported that SodaStream third-quarter segment sales were up 157% for CO2 canisters, 53% for flavoring, and 12% for soda machines at retail locations. While these numbers are approximations, they're regarded as being very accurate, and NPD is the gold standard in the industry. As you can see, the company is performing admirably pre-holiday in all categories; the decreased sell-in numbers reported by SodaStream are a result of poor inventory management by a few of the company's customers. 

In the video below, Motley Fool analyst Blake Bos explains how sell-in and sell-out work, dives into the U.S. results, and explains why he thinks Wall Street has fallen off its rocker.


Blake Bos owns shares of SodaStream. The Motley Fool recommends SodaStream. The Motley Fool owns shares of SodaStream. 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.