Should You Buy a SodaStream to Save Money?

There are lots of reasons American families decide to purchase a household soda maker from SodaStream (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.

Image source: Getty Images.

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:

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.

Soda Prices Around the World | Create Infographics

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:

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.

Image source: Getty Images.

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.