Did SodaStream Get Lost in Translation?

SodaStream has teamed up with Scarlett Johansson to try to build up the company's brand, but it's got a long way to go.

Jan 28, 2014 at 6:15PM

In Lost in Translation, Scarlett Johansson plays an American newlywed who has followed her husband to Tokyo while he photographs a Japanese rock band. She meets Bill Murray, who's playing a slightly sadder version of Bill Murray. The two wander through Tokyo, building a strong personal relationship even as their connection to the outside world remains loose and disconnected. SodaStream (NASDAQ:SODA) is apparently the new Bill Murray.

The carbonator announced a new partnership with Johansson, setting her up as the company's first brand ambassador. (It makes you wonder if Michael Jordan ever thought of himself as a brand ambassador for Nike -- I imagine not.) Days after the announcement, SodaStream's stock fell more than 25% when the company announced an update to its fiscal year results. It feels very much like SodaStream has wandered off into the night in a land it doesn't understand, staring at Johansson's face as the rest of the world moves on to new things.

SodaStream's 2013 update
At the end of November, SodaStream was looking for net revenue of around $54 million. In January, that expectation dropped to $41.5 million -- 95% of last year's income. Johansson doesn't seem to care. She's already shown up all over the online store and in an infomercial, of sorts. Her official role is to help get the SodaStream message across, something the company has made a bit of a reach for by tying Johansson's self-empowerment outlook to SodaStream's vision of "empowering people with easy-to-use, fun ways to enjoy better-for-you, better-for-the-environment bubbly beverages." 

After the update, SodaStream's stock tanked, and it's now down 25% on the year. Yesterday, Barclays piled on, cutting the stock's price target from $100 per share to $55. Ouch.

The shortfall came mainly from the company's holiday season, with management citing sales, product costs, and currency exchange rates as drags on the income statement. SodaStream argues that the future is still bright -- just not right away.

SodaStream's 2014 in a nutshell -- or bottle, I guess
Margins will continue to be pressured in the first half of 2014, according to the company's recent investor presentation. That's going to ease, though, as the year goes on. Then, SodaStream is going to be back to the races. The biggest key to the company's future success lies in the maturing of markets.

Management compared the Swiss market to the American market, arguing that the Swiss market is more mature. There, base units account for just 18% of total sales, while consumables make up the rest. That's pushing margins up in Switzerland, where operating margin is above 25%. In the U.S., on the other hand, consumables only make up 54% of total sales, and operating margin is a mere 5%. 

This year, SodaStream needs to get America back on track if it wants to keep it together. Sales in the Americas account for more than a third of total sales, so any margin pressure will be reflected across the whole business. To help its image, SodaStream is going to make a Super Bowl appearance, so be on the lookout for that.

Better options are out there
While SodaStream has been lumped in with growth stocks for some time now, it just isn't growing. In Lost in Translation, Murray ends up with the wrong woman, because it seems like the right thing to do. That's a short-term investment. To get beyond the ups and downs of SodaStream, consider reaching out to companies with stronger brands. SodaStream has said it wants to "normalize" the brand, making it a household name. If that happens, I'll reevaluate the company's strength. For now, though, I'm happy to leave Scarlett at the bar with Bill.

Spend your time and money wisely
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Andrew Marder owns shares of Barclays. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information