Sodastream International Ltd.'s Grape Escape

SodaStream teams up with Welch's for new flavors.

Jan 30, 2014 at 9:06AM

It's not all Scarlett Johansson and Super Bowl snubs for SodaStream (NASDAQ:SODA) this week.

The company behind the namesake beverage maker that transforms tap water into flavored carbonated beverages has another big name in its corner. SodaStream announced on Wednesday morning that Welch's -- the iconic grape farming co-op -- will be offering a line of sparkling drink concentrates. The two companies will be developing the new line exclusively for SodaStream's beverage system.

This is the latest deal with a recognized brand that SodaStream has entered into, following other well-known supermarket staples including Del Monte, Crystal Light, Kool-Aid, V8 Splash, and Country Time that have offered up their brands as flavors for carbonated beverages.

SodaStream can use the boost. Flavor sales were the biggest disappointment in SodaStream's third-quarter results, climbing just 7% over the prior year and declining in the U.S. market. The rest of the pop star's business grew just fine during the period. SodaStream's soda maker starter kits soared 27% during the quarter, and there was an even more impressive 34% spike in CO2 refills.

Folks are buying the beverage makers, and the even healthier 34% gain in carbonators proves that they are being used. The problem appears to be that too many people are simply settling on making seltzer to drink on its own or mix with heartier libations. 

We don't know if flavor sales improved during the fourth quarter, but it wouldn't be a surprise if the category is still in a funk. SodaStream announced earlier this month that overall revenue growth decelerated to 26% during the period, but that net income would clock in sharply lower. Syrups and CO2 refills are its highest-margin products, and the trend would suggest that, if there's any weakness between the two line items, it will come from the flavors. 

Having Welch's grape concentrate available to create natural grape sodas won't be able to singlehandedly turn sluggish flavor sales around. However, it's just another round of validation for the SodaStream platform at a time when the budding yet stumbling beverage company needs it the most.

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Rick Munarriz owns shares of SodaStream. The Motley Fool recommends and 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.

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