Why SodaStream's New Innovative Flavor Caps Are a Big Deal

The 2013 holiday season is under way, and SodaStream (NASDAQ: SODA  ) has released its new product, called "SodaCaps," just in time. These small containers, shown at the bottom of the following picture, are single-use recyclable flavoring capsules that were created to offer something more convenient than the company's current bottles of syrup flavoring (seen immediately below) for at-home soda-making.  

For anyone accustomed to Green Mountain Coffee Roasters' K-Cups, it's easy to see just what SodaStream is trying to accomplish with its flavor caps here: high-margin profits.

Image: Green Mountain Coffee Roasters.

I'll take some high margins with that pink grapefruit cap, please.
Green Mountian and SodaStream use a strategy called the razor-and- blade business model, in which a company sells a low-margin item that requires the use of a high-margin item, which has to be replaced frequently. In Green Mountain and SodaStream's case, the low-margin items are the beverage makers, and the high-margin items are the K-cups, SodaCaps, CO2 canisters, and syrup flavorings. 

These new caps are a wealth-generating addition to SodaStream's current bottled flavorings and serve a much larger purpose as well.

Taking Coca-Cola and Pepsi down
If these new caps are anywhere near as successful as K-Cups, beverage giants Coca-Cola and PepsiCo have a lot to worry about. For those unfamiliar with SodaStream's history, the company has diligently been working over the past few years on creating a more convenient solution to flavoring to disrupt the soda industry, and SodaCaps appear to be their best effort yet. 

In the following video, Motley Fool analyst Blake Bos discusses these new caps and explains why they're so important for the company's long-term plans. 

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9/26/2016 4:00 PM
SODA $26.65 Down -0.64 -2.35%
SodaStream CAPS Rating: **