SodaStream Will Beat Bevyz and Keurig Cold

Source: SodaStream.

SodaStream (NASDAQ: SODA  ) hasn't had a problem dominating a market in which its closest competitors have been a fledgling bottled water company with a beverage maker that failed to gain meaningful distribution and a Kickstarter-funded machine that has yet to see the light of day. The marketplace is going to intensify in the coming months, but that doesn't mean it will be curtains for the global leader of in-home carbonation.

It's true that the new machines have soft drink giants as major backers. Coca-Cola (NYSE: KO  ) turned heads when it invested $1.25 billion for a 10% stake in Keurig Green Mountain (NASDAQ: GMCR  ) ahead of the launch of Keurig Cold at some point in the java heavy's next fiscal year. Last month saw PepsiCo (NYSE: PEP  ) partner with Bevyz, a company putting out a new beverage platform as early as next month. Malta-based Bevyz isn't a household name, but two weeks ago it found a partner that is no stranger in the stateside appliance market. The multidrink platform that makes coffee, carbonated drinks, and even soup from the same small appliance will go on sale later this year as a "Cuisinart powered by Bevyz" machine.

At a distance, one would think that SodaStream's fizzy days are about to go flat. How will SodaStream's homegrown soda flavors or carbonated tweaks of brand-name beverages be any match for newfangled doohickeys cranking out Coke and Pepsi?

It's a fair question, but the answer -- an encouraging one for SodaStream investors -- rests in the even bigger question of why Coca-Cola and PepsiCo didn't just turn to the market leader first. After all, Coke could have used the $1.25 billion it shelled out for its 10% Keurig stake to just swallow all of SodaStream. But it didn't.

Pop goes the world
Keurig Cold isn't the only reason that Coca-Cola wrote a 10-figure check to Keurig Green Mountain earlier this year. Coca-Cola has been expanding beyond its flagship soda brands, and this is a convenient way to make a big splash in coffee the way it has in the past by picking up fast-growing makers of juices, teas, and bottled waters.

However, diving a bit into Keurig Cold and Bevyz sheds some light onto why the two cola-war behemoths turned to platforms that weren't even on the market instead of siding with SodaStream -- and, again, SodaStream bulls are going to like what they see. Keurig Cold and Bevyz will be high-end machines with very controlled experiences. Slip a pod into a Bevyz and a sensor scans it to see if it needs to trigger the internal boiler, cooling system, or carbonator. Keurig Cold won't be as multidimensional at first, but it too will rely on a controlled pod experience with sensors triggering a set amount of carbonation. 

Of course. Coca-Cola and PepsiCo were never going to put out bottles of their syrup. They are never going to let folks control the carbonation levels that would fudge with the flavor's consistency. The controlled experience may be what sells Keurig Cold and Bevyz machines at first, but isn't customization the point of making beverages at home? Also, given the sophistication of these systems and single-serve pods, how much more expensive will a serving be with these machines?

Coca-Cola and PepsiCo aren't going to sacrifice their lucrative bottles, cans, and fountain sales by pricing Keurig Cold and Bevyz solutions at price points that are cheaper than the existing product. That would betray their bottlers and distribution networks. They're not going to tweak their formulas to provide a healthier beverage the way that non-diet SodaStream colas have a third of the calories, carbs, sugar, and sodium of Coke or Pepsi. 

It's not personal, it's just fizz-ness
Coca-Cola and PepsiCo will be able to match the convenience and environmental benefits of SodaStream, but lacking the value and nutritional selling points will make Kuerig Cold and Bevyz far less attractive in reality than they appear in theory. They will be incomplete alternatives, and since Coca-Cola and PepsiCo are unlikely to partner with these unproven countertop appliances unless they know that the platforms won't be flooded with cheaper alternatives, it's a safe bet that selection will be a lot less than the more than 60 official flavors currently available on SodaStream in this country.

Even if that bullish SodaStream thesis doesn't hold up, won't the success of Keurig Cold and Bevyz serve to educate the market and widen the acceptance of in-home carbonation? Won't that increase the thirst of SodaStream's cheaper solutions with broader beverage customization and a better nutritional profile?

The bears have won these past three quarters. SodaStream has shed nearly half of its peak value from June of last year. However, instead of searching for better answers maybe the market needs to strive for better questions. What really needs to be asked here is not how Keurig Cold and Bevyz will hurt SodaStream, but rather how can SodaStream lose?

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Read/Post Comments (4) | Recommend This Article (3)

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  • Report this Comment On April 08, 2014, at 3:15 PM, Risky88 wrote:

    Funny how just 2 months ago you were writing article exclaiming how SodaStream was doomed.

    Funny how when you go onto Bevyz website

    Pepsi is no longer listed as a partner and the partnership you speak of

    I haven't been able to any evidence that it is true.

    What was true was that Pepsi was listed as a partner 2 months ago on Bevyz website, but was just recently taken down as a partner about a month ago.

    Nor on their website does it say anything about anything about Bevyz partnering with Pepsi.

    Let it be known that Pepsi stated in their last CC that they specifically wanted to partner with a company that could successfully market their products.

    Obviously gmcr can't do that with KO having given them 1.25 billion

    Bevyz will never make it big with only about 10 flavors listed , 1 carbonation setting with a

    300$ price tag.

  • Report this Comment On April 08, 2014, at 4:42 PM, pac1investor wrote:

    Rick, can you please answer Rissky88 if noise of partnership btwn Pepsi and Bevyz is untrue and only hot air speculation in the market place????

    Anyway true or otherwise, SODA is the way to go for long term investment. Destined to grow exponentially soon as it expands in the great wide wide world---especially in Mexico and hopefully in the S. America's and African continents where abundant thirst for cold healthy sodas and water abound.

  • Report this Comment On April 08, 2014, at 5:38 PM, TMFBreakerRick wrote:

    PepsiCo confirmed to Just Drinks that it had a relationship with Bevyz just a few weeks ago ...

    http://www.just-drinks.com/news/pepsico-readies-home-carbona...

    The rub is that it could very well be a regional relationship, though we should find out soon enough when the Cuisinart device hits the market. Either way, for reasons I point out in the article, it would be a non-event.

    Rick

  • Report this Comment On April 09, 2014, at 3:04 AM, Interventizio wrote:

    I don't get it. Why would Pepsi not investing in SODA be a good thing?

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10/24/2014 4:00 PM
SODA $24.45 Up +3.26 +15.38%
SodaStream CAPS Rating: ***
GMCR $145.24 Up +1.24 +0.86%
Keurig Green Mount… CAPS Rating: **
KO $41.03 Up +0.17 +0.42%
Coca-Cola CAPS Rating: ****
PEP $94.60 Up +0.84 +0.90%
PepsiCo CAPS Rating: ****

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