SodaStream (SODA) investors hoping for a little clarity on the potential of a beverage giant warming up to a minority stake got what they needed. They just didn't get the response that they wanted.
Yesterday's conference call began with promise. SodaStream was tasked with calming investors after a challenging quarter in which U.S. sales plunged 28%, and Scott Guthrie -- brought in just five months ago to oversee all operations in North and South America -- seemed to be up to the task. He revealed that SodaStream is working on "single-serve delivery options" that in theory would build on the existing SodaCaps to offer a more technologically advanced platform.
This is a pretty big deal. The ability for soda giants to dictate flavor consistency likely played a major role in Coca-Cola deciding to invest more than $2 billion for a 16% stake in Keurig Green Mountain. Coca-Cola is willing to throw its magnetic beverage brands behind the unproven and unreleased Keurig Cold platform -- and not SodaStream -- because the java giant's carbonated system will likely protect the cola giants.
SodaStream was asked about that being a hangup in PepsiCo (PEP -0.62%) or any other non-Coca-Cola soda giant striking an alliance with it. Would SodaStream ever offer a system that can produce a consistent beverage for all drinkers? CEO Daniel Birnbaum's response was passionate, but perhaps misguided in the eyes of Wall Street speculators.
"The argument that the consumer wants exact dosing is a reflection of the trap that those beverage companies are," he said, going on to brag about the benefits of SodaStream owners being able to dictate carbonation and syrup levels. "We empower the consumer with an inexact dosing."
That sounds powerful, but it misses the point entirely. There is no doubt that SodaStream users enjoy being able to decide how bubbly they want their pop. It's not the consumers that need convincing. Coca-Cola and PepsiCo are the ones that pride themselves on the predictably steady taste of their sodas. Coca-Cola's commitment to Keurig Cold proves that it's willing to go beyond its network of bottlers and fountain sales to give the home-based channel of distribution a shot. PepsiCo will be well-served to follow suit, and if SodaStream were to introduce a machine whereby a soda giant could control the consistency of its home-brewed product, PepsiCo -- or any of the other global soda players that have sidestepped SodaStream -- would be insane not to partner with SodaStream. Coca-Cola has already chosen its side. PepsiCo could have chosen SodaStream, living up to the buyout chatter that first erupted 11 months ago.
But SodaStream prefers to repel the natural partners on principle. It thinks it's trying to ram binge viewing or cloud computing or digital delivery down the throat of disrupted masses, when the best way to win over the pop stars is to give them what they want in order to give consumers the brands that they need.
