1 Reason Starbucks Will Help SodaStream

Starbucks rolls out Fizzio across thousands of stores, but SodaStream shouldn't worry.

Jun 25, 2014 at 11:14AM

Starbucks (NASDAQ:SBUX) finally began arming its baristas with carbonators across the Sun Belt. Fizzio -- the handcrafted beverages that the java giant has been testing in a handful of stores since last year -- became available at 3,000 Starbucks locations earlier this week, giving customers who may not have a hankering for coffee a reason to give in to the Siren's temptation. 

Starbucks is now making golden ginger ale, spiced root beer, and lemon ale at its stores. The move is naturally leading some to wonder if this will help or hurt SodaStream (NASDAQ:SODA). We know what the market thinks; shares of SodaStream hit a 52-week low yesterday.

We also know what Starbucks thinks. In Monday's press release announcing its push into the $415 billion carbonated-beverage market, the baron of baristas seemed to be calling out SodaStream in pumping up Fizzio's fizzing process: "Unlike existing sodas or at-home carbonation options, the machine carbonates finished beverages, ensuring every ingredient in the beverage receives the same level of carbonation and maximum flavor."

That may very well provide a fresher beverage than even SodaStream, but let's not assume that Starbucks turning into a pop star at thousands of stores will result in the end of the leader in at-home carbonation. I mean, have you seen what Starbucks is charging for these throwback sodas? 

A Fizzio soft drink will set sippers back $2.45 for a tall serving. That's actually more than what Starbucks charges for a traditional tall coffee. In other words, Starbucks is attaching a pretty high value on homemade sodas. That's one thing that will definitely help push SodaStream's value proposition. 

It gets better. For an extra $0.50, a friendly barista will run your ice tea or Starbucks Refresher beverage through the Fizzio machine. Think about that. Starbucks is setting apart its carbonated offerings by charging more for them than its noncarbonated drinks. If the stiff price for a handcrafted root beer doesn't convince you of the value that SodaStream brings to a consumer's home, surely seeing Starbucks itself charging half a buck to fizz up flat drinks has to help.

SodaStream is still early in its stateside adoptions process, but Starbucks will also help on that front. As more people walk into Starbucks and see folks sipping down sodas, they will file that away in their minds for the next time they run into a SodaStream maker at the store. We saw what the premium coffee craze did for Keurig; now SodaStream is in the syrupy sweet spot, as the thirst for handcrafted sodas is about to take off. The market may not see it that way, but Fizzio is the best thing that could happen to SodaStream.

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Rick Munarriz owns shares of SodaStream. The Motley Fool recommends and owns shares of SodaStream and Starbucks. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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