Wal-Mart Rollout Puts the Fizz Back Into SodaStream

After a rather difficult winter for SodaStream's U.S. operations, a recent grand rollout by Wal-Mart Stores provides some much needed fizz to the business.

Jun 11, 2014 at 6:00PM

(NYSE:WMT)

SodaStream (NASDAQ:SODA) continues to offer the promise of providing a home beverage maker solution for the U.S. market, yet the company struggled through a difficult couple of quarters that has the stock at multi-year lows. After decades of solid growth in Europe and continuing success in the first quarter, the Americas were suppose to offer unlimited growth with the ability of the home beverage maker to take market share from Cola-Cola's (NYSE:KO) and PepsiCo's vast soda operations. The recent seasonal summer display by retail giant Wal-Mart Stores (NYSE:WMT) offers some hope for reinvigorated growth in the very important U.S. market.

For various reasons including an inventory overstock and a brutal winter that greatly damaged the whole retail sector, revenue for the Americas  plunged 28% to a meager $34.8 million for the quarter. For investors following SodaStream this news was right in line with expectations. For those who see the recent weakness as only a bump in the road typically encountered by high-growth stories, the recent mega roll-out by Wal-Mart provides ample reason to believe that the long-term potential has not disappeared.

Wal-Mart's plan
A couple of weeks ago, the massive retailer implemented a 20-foot seasonal hotspot roll-out in 1,600 stores. The plan involves leaving the SodaStream products on display for 12 weeks, or basically covering the summer months. Interestingly, the plan didn't impact the previous 4 foot displays, providing the company with 24-feet of exposure at roughly half of the domestic Wal-Mart store base.

Part of the issue with disappointing first-quarter domestic sales was the tough comparisons from the program that took place at Wal-Mart and lasted until May 2013. The current program vastly exceeds the one from last year and it has dramatically more shelf space.

One important part of this plan is the limited number of soda makers actually on display that will reduce inventory issues after the program ends. Prominent in the displays are the new Play soda makers that offer a compelling entry price point, and -- even more importantly -- there is limited supply on the shelves. During a visit to my local store (something every investor should do to better understand the roll-out), the inventory levels in these new displays were only a few per machine.

The ironic part of the Wal-Mart move to expand the display for SodaStream during the summer is that the company reduced inventories across the board last year.

The U.S. is down but not out
The domestic retail story for SodaStream gets confusing due to revenue recorded based on sell-in to retailers, and the best sellout data from NPD Group excludes the company's top customer. In essence, the numbers are always doomed to lumpiness with inventory builds not always matching retailer sales.

For the first quarter, the encouraging numbers were the most important -- the usage-based ones. According to the company, gas refills increased 27% to hit a record of 1.4 million. Globally the number of gas refills hit 5.8 million to match the record from last summer and easily exceed the 4.8 million from the first quarter of 2013.

Screen Shot

Source: SodaStream Form 6-K

Flavor units declined only 6% in the U.S. compared to 19% for the soda makers, again suggesting that absent the inventory issues customers were busy using the product.

Bottom line
These enhanced plans by Wal-Mart should indicate to investors that SodaStream is far from fizzling out in the Americas. Even more, it is intriguing that a company already selling so many products by Coca-Cola and PepsiCo would invest this much shelf space to a company intent on replacing those large customers. Clearly, if Wal-Mart had any inclination that the U.S. consumer didn't favor the SodaStream products, it wouldn't invest this much time and effort into it. And Coca-Cola definitely wouldn't invest $1.2 billion into Keurig Green Mountain if the Americas lacked growth potential in cold beverages made at home.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Mark Holder and Stone Fox Capital clients own shares of SodaStream. The Motley Fool recommends Coca-Cola and SodaStream. The Motley Fool owns shares of SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers