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Forget PepsiCo: This Company Is a Better Strategic Partner for SodaStream Today

SodaStream (NASDAQ: SODA  )  stock surged nearly 12% today on news that the maker of at-home carbonation systems will sell as much as a 16% stake in its business to a "strategic entity."Beverage giants PepsiCo, Dr Pepper Snapple Group, and Starbucks (NASDAQ: SBUX  ) were listed on the Calcalist website as the prospective parties.

The Israeli financial news publication said the deal could value SodaStream at about $52 a share, Reuters reported. That is roughly a 21% premium from the stock's current price of $41. Let's look at what this could mean for SodaStream and its stock going forward.

Putting some fizz back in SodaStream's step
While a potential deal is purely market speculation at this point, it would be welcome news for SodaStream. The company took a hit earlier this year via a similar tie-up between Coca-Cola (NYSE: KO  ) and Keurig Green Mountain  (NASDAQ: GMCR  ) .

In February, Coca-Cola coughed up a cool $1.25 billion for a 10% stake in the company then called Green Mountain Coffee Roasters (the name change occurred in March). As part of their 10-year agreement, Keurig plans to launch its Keurig Cold beverage system next year; as you probably guessed, users will be able to make Coke's branded soft drinks at home.

This pits deep-pocketed Coca-Cola against the far smaller SodaStream. However, locking down a similar investment from this so-called "strategic entity" would give SodaStram a much larger distribution network. It's easy to assume Pepsi would step up to the plate, particularly given Coke's recent deal with Keurig Green Mountain. But from where I sit, Starbucks seems like the obvious choice.

Not your average cup of joe
Let's not forget that Starbucks filed a patent last year for a beverage maker named Fizzio. As the name suggests, the machine makes carbonated drinks -- much like those you can make with a SodaStream device. On top of this, Starbucks has been testing flavored sodas for months now at a few cafes in select markets such as Atlanta and Austin, Texas.

Source: Starbucks.

Starbucks is looking for new growth avenues outside of its core coffee market, and this could be a nice fit. SodaStream is today the leader in the at-home soda system market, after all. Additionally, SodaStream is only in 1% of U.S. households so far, compared to 25% of households in Sweden. There's clearly plenty of growth left for the company on the domestic front. Ultimately, joining forces with Starbucks would significantly expand SodaStream's distribution platform and help the company maintain its dominance in the do-it-yourself beverage space.

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  • Report this Comment On April 17, 2014, at 3:37 AM, Interventizio wrote:

    "The Israeli financial news publication said the deal could value SodaStream at about $52 a share."

    And I bought it at 55. What a shame.

  • Report this Comment On April 17, 2014, at 11:18 AM, pac1investor wrote:

    Tizio, patience is key to SODASTREAM investment strategy. Expect big short squeeze and will double or triple in 12mos from now.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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