Should You Buy a SodaStream to Save Money?

There are lots of reasons American families decide to purchase a household soda maker from SodaStream (NASDAQ: SODA  ) , but saving money probably shouldn't be one of them. That's the conclusion reached through consumer research conducted by Business Insider recently.

It's not that a SodaStream doesn't pay for itself in savings versus store-bought beverages. It can, especially if you're primarily a carbonated water drinker. But you would have to be a veritable sodaholic to recoup your investment in a reasonable amount of time if you're primarily a cola drinker.

Still, before jumping to conclusions, it's best to run the numbers and see if the cost-benefit comparison makes sense to you. So let's take a look at BI's research, including a caveat that could help explain SodaStream's overseas success.

SodaStream Pure. Source: SodaStream.

The SodaStream savings equation
In a head-to-head duel with store-bought soda, the SodaStream do-it-yourself kit faces a payoff hurdle of about $115 for a midrange machine. That price excludes the initial CO2 cartridge, which is considered an ongoing variable cost. Until consumers recoup that up-front investment, they're not experiencing any true savings by making their own soda pop.

Business Insider purchased a SodaStream Pure model (shown at right) for its research, and the cost-per-serving analysis was completed for both carbonated water and regular cola. The resulting savings are shown in the chart below:

 

SodaStream

Store-Bought Generic Brand

Difference in What You Pay

1 liter of carbonated water

 $0.25

 $0.79

 $0.54

1 liter of soda

 $0.67

 $0.89

 $0.22

Source: Business Insider.

At first glance, SodaStream seems to offer a compelling value proposition. The soda maker saves more than two quarters per liter of sparkling water and nearly a quarter per liter of soda.

However, this means you would need to drink 213 liters of sparkling water ($115/$0.54 = 213) or 522 liters of soda ($115/$0.22 = 522) to break even on the machine. How long that would take, of course, depends on your consumption patterns.

If you guzzle 20 ounces of fizzy water each day, then your payback period would be just less than a year. That's a reasonably short turnaround on your investment.

But the addition of flavored syrup makes a notable difference. To reach that milestone drinking 20 ounces of flavored soda per day would take 2.42 years. That's the equivalent of 883 consecutive days, which amounts to an impressive soda-slurping streak!

It's well known that Americans drink a sizable volume of soda annually -- 167 liters per capita to be exact -- but that still only equates to roughly 15 ounces per day. Based on this information, it would be hard to justify the price of the machine based on cost savings alone.

The importance of place
To be sure, the prices shown above rest on several assumptions, including the price of a liter of sparkling water or cola from your local grocer. When I personally conducted a spot check, both the generic products and name brands such as Pepsi or Coca-Cola hovered around the same price range as those shown by Business Insider. For perspective, I live in North Carolina, while the author's research location was Chicago. All things considered, it's best to run your own numbers to confirm.

Within the continental United States, I doubt those prices vary too widely, but in a larger context your grocer's geography can really make a difference. One omission in BI's otherwise thorough research is the considerable variance in SodaStream economics around the globe.

For instance, the domestic price of Coca-Cola, which I found to be about on par with the $0.89 per liter shown above, varies dramatically from the price of the same product overseas.

Based on food price research conducted by Daily Finance in 2011, I ran a few numbers and updated the figures to reflect current-day discrepancies. The following chart is an approximation that shows the vast difference in the price of Coca-Cola from one country or city to another.

As you can see, Europeans and Australians pay a hefty premium for the iconic American Coca-Cola product. The main drivers behind this discrepancy, as pointed out by Quora, are related to variances in consumption patterns, value-added taxes, and higher distribution costs. Thus, it's part culture, part taxes, and part distribution differences that are to blame.

Taking this global data into consideration, the economics for the potential buyer of a SodaStream machine change dramatically. If we were to assume the cost of SodaStream's machines, CO2 canisters, and syrups were relatively constant around the world, the trade-off looks much more attractive in a handful of other countries.

In Germany, for example, the number of liters of cola necessary to recoup the initial investment is only 64, compared to the 522 liters required in the U.S. To a lesser extreme, the same is true for several Western European countries and Australia:

Location

Price per Liter in $USD

# of Liters to Pay Off Machine

Germany

 $2.48

 64

Australia

 $2.03

 85

Paris

 $1.83

 99

Spain

 $1.34

 172

United Kingdom

 $1.26

 195

United States

 $0.89

 522

Hong Kong

 $0.79

 958

India

 $0.71

 2,875

Author used DailyFinance data from 2011 and assumed overseas soda inflation consistent with U.S.

Armed with this information, the answer to the question, "Should you buy a SodaStream to save money?" is not so straightforward. If you're American, the economics boil down to two critical factors:

  • If you drink a lot of carbonated water (greater than 20 ounces per day), then yes, a SodaStream makes sense. You'll start saving after the first year.
  • If you're a casual cola drinker (less than 15 ounces per day), the economics don't really add up. It could take five years or more to recoup the cost.

If you're not an American, however, the equation shifts. In that scenario, it really depends on how cheap cola sells for at your local retailer. For Western Europeans, at least, SodaStream probably looks like a relative bargain. Even in the U.K., where soda prices are only $0.37 higher than the U.S., a consumer would see a payback more than twice as fast as his American counterpart.

What this means for you and SodaStream
For customers, the cost-benefit isn't quite cut-and-dry, although the economics are less favorable in the U.S. than across the pond. Still, it's probably true that many customers are less concerned with pure savings and more concerned with convenience, a healthier alternative, and the elimination of waste from bottles. In those respects, SodaStream continues to differentiate itself from the mainstream.

For SodaStream, that differentiation strategy will be critical. While it is not often discussed, the price disparity in store-bought beverages could explain the variance in machine ownership between, say, Western Europe and the U.S. SodaStream, for example, has three times the household penetration in Germany and France than in the U.S. And in Sweden, ownership levels are at least 12 times higher. Going forward, this beverage maker is hoping Americans grow just as thirsty for its products as their European counterparts.

SodaStream's Source. Source: SodaStream.

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Read/Post Comments (12) | 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 March 07, 2014, at 7:22 PM, fschell wrote:

    You need to talk to heavy coke/pepsi drinkers!

    You sound like someone who views himself the typical occasional soda drinker. Many of us drink much more soda per day.

    Spare me the sermon about consumption. My habits have served me well for many years.

  • Report this Comment On March 07, 2014, at 9:00 PM, martinitony wrote:

    I'm also a CPA. Your numbers really make little sense if talking about a typical family or even a loner who drinks quite a bit a soda. A family of four might drink 2-3 liters per day, maybe as much as 500-1000 liters per year.

    The machines are sold to actual people and families, not to averages.

    The question really is how many potential users are there, people or families who might find the savings and convenience and the FUYN worth it.

  • Report this Comment On March 07, 2014, at 9:20 PM, TMFBoomer wrote:

    @fschell and @martinitony

    Thanks for the comment and point taken. There are plenty of individuals and families that are going to consume more than, say, 20 ounces of soda per day at home. For those, you'd want to adjust accordingly to calculate the payback. And then, it might be a year to payoff the machine.

    I used the average as a reference point because, well, it's the average for a typical American.

    You could also extrapolate that a SodaStream would be used in an office and therefore used much more heavily. You'd have a much quicker payoff in that scenario as well.

    Isaac

    @TMFBoomer

  • Report this Comment On March 08, 2014, at 1:45 AM, Risky88 wrote:

    seriously can't even believe this article was even written, off a video that was only about minute long with unrealistic assumptions.

  • Report this Comment On March 08, 2014, at 1:47 AM, Risky88 wrote:

    total joke

  • Report this Comment On March 08, 2014, at 8:06 AM, TMFBoomer wrote:

    @Risky88

    This article was written precisely because the video made unrealistic assumptions. I wanted to put the numbers out there - which are reliable except for the "average consumption" part where BusinessInsider assumes we drink a liter per week. It's hard to see exactly how the calculations are made in the video so I wanted people to be able to take the numbers and run them for their own households.

    The rest of the article which parses through soda prices globally is unrelated to the video but elaborates on the issue a bit.

    Isaac

    @TMFBoomer

  • Report this Comment On March 08, 2014, at 1:37 PM, spmadden77 wrote:

    There are many other points to consider. We purchased ours for sparkling water. 1 ltr Peligrino is $1.35+ In California then you are taxed a redemption fee of 10 cents on top of that. We drink about 2 daily. We calculate we save $600 annually. In addition, we don't have to schlep heavy bottles home etc.. Don't worry about bottles going flat. I think soda should purchase ever pure water purification company. Have the whole set up. We love soda stream for these reasons and think others will too. And we're not even getting started on the environmental impact.

  • Report this Comment On March 08, 2014, at 7:23 PM, sk8rzmom wrote:

    I love my SodaStream, which is at least four years old, but still keeps chugging along.

    I love just plain bubbles, they make me happy.

    I love Pepsi too, but now I don't have to schlepp it from the store, to the car, in the house, in the fridge. And I don't have to schlepp those noisy cans out to the recycle bin. SodaStream saves my back.

    My soda never goes flat.

    I am not so tied to going to the grocery for my little bubble fix; just walking in the grocery store with its myriad marketing schemes presents a financial challenge.

    I live in a mountain town, where our water is the envy of every flatlander who comes to visit. This pure, mountain snow-melt comes right out of my kitchen faucet. Why would I settle when I already have what everyone else pays $1.39/bottle for?

    SodaStream really works for me.

  • Report this Comment On March 08, 2014, at 8:46 PM, brybat wrote:

    In California we have to pay 5 or 10 cents per container CRV, depending on the container. We can go to a recycle center if we want to recoup some of the money, but I don't like to pile up sticky bottles and cans at my house then drive down to the recycle center to stand in line with drunks and bag ladies.

    Everyone talks about the cost to make a bottle of Sodastream compared to store-bought soda and about the trouble of lugging home bottles and cans of soda.

    The benefit to me is in not paying CRV and not having to recycle.

  • Report this Comment On March 12, 2014, at 2:18 PM, TMFOrangeblood wrote:

    This isn’t a perfect analogy, but it might be interesting to think about this in terms of valuing a stock. If it takes two years to recoup your investment, you’re buying the device for a P/E of 2. (Of course, the machine will break eventually, so these aren’t earnings in perpetuity.)

    But based purely on a cost analysis, and assuming a five-year life of the machine, even taking 2.5 years to pay back is still a bargain. :)

  • Report this Comment On July 10, 2014, at 3:54 AM, alesmith1 wrote:

    The author's international analysis has a critical fault. He neglects the huge variance in Sodastream machine and CO2 prices globally.

    you mention India having extremely cheap Coke. True. What isn't mentioned is that in order to get a Sodastream in India, you pay 3x the global price.

    South Korea, too. Cheap Coke, expensive Sodastream. Really 3x the global price!

    Compare these two. It's easy to convert; 1000 Korean won = $1.

    http://sodastream.co.kr/product/list.html?cate_no=45

    Amazon USA: http://goo.gl/7FWVGw

    In Asia, the Sodastream really can't have a cost benefit; it has to be positioned as a luxury good.

  • Report this Comment On July 10, 2014, at 3:57 AM, alesmith1 wrote:

    The author's international analysis has a critical fault. He neglects the huge variance in Sodastream machine and CO2 prices globally.

    you mention India having extremely cheap Coke. True. What isn't mentioned is that in order to get a Sodastream in India, you pay 3x the global price.

    South Korea, too. Cheap Coke, expensive Sodastream. Really 3x the global price!

    Compare these two. It's easy to convert; 1000 Korean won = $1.

    http://sodastream.co.kr/product/list.html?cate_no=45

    Amazon USA: http://goo.gl/7FWVGw

    In Asia, the Sodastream really can't have a cost benefit; it has to be positioned as a luxury good.

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