Starbucks Has a Carbonator and It Isn't Afraid to Use It

Starbucks is fizzing up the Sun Belt this summer, and that's not bad news for SodaStream.

Jul 8, 2014 at 1:05PM

Starbucks (NASDAQ:SBUX) introduced handcrafted carbonated soft drinks at 3,000 of its stores across the Sun Belt last month. I finally got around to giving Fizzio a partial taste test over the weekend. 

I'll be frank: I wasn't overly impressed by the Spiced Root Beer. On paper it sounds like fizzing up cinnamon, nutmeg, clove, and star anise to make a fresh carbonated soda can't lose, but it didn't exactly make me crave another. The tiny 16-ounce serving that set me back two bucks and change was more ice cube than soda, and the drink itself tasted more like something a chemist would drum up at a throwback soda fountain shop a century ago. 

It's unique. I'll give Starbucks that. For better or worse, it's not like any canned or bottled root beer that I have ever tasted. However, as a big root beer buff it's not going to make me surrender my depressed SodaStream (NASDAQ:SODA) shares. 

I'll give the other two flavors -- Golden Ginger Ale (consisting of ginger, citrus, and brown sugar) and Lemon Ale (lemon juice with a hint of apricot and ginger) -- a shot later this summer. It's hot in the Sun Belt, and you can't fault Starbucks' timing on this rollout. 

There's power in wielding carbonators 
The marketing emphasis is clearly on the three handcrafted sodas, taking shots at the way traditional soft drinks are consumed. In the latest example of a company turning to creative marketing techniques to get noticed, Starbucks set up a Fizzio vending machine at the boardwalk of the Santa Monica Pier. Unsuspecting customers pushing buttons for one of the three sodas were greeted by an actual barista whipping up the beverage of choice in the machine.

The video hasn't exactly gone viral. It's been viewed just thousands of times on YouTube. However, it's only been up less than two weeks. Give it time.

Starbucks isn't just taking its carbonators for granted. The investment has already been made in installing the machines that fizz up still beverages, and it doesn't just have to be root beer, ginger ale, or lemon soda. For an extra $0.50 customers can have their iced teas and Starbucks Refreshers beverages done up in carbonated form.

The carbonated beverage market is huge. We're talking about $415 billion in annual sales, according to Starbucks' press release announcing the push for pop stardom. It's only fitting that Starbucks should make a push of its own into the soft drink market, hoping to give it a premium spin in the way it succeeded with coffee. However, I'm still not convinced that this hurts SodaStream. It will educate the market. It will electrify the consumer marketplace, ideally in the way that Starbucks' success helped usher in the era of Keurig and other single-serve brewers of premium brews. SodaStream isn't going to be a loser here. It's going to be the hot kitchen appliance that Fizzio fans buy to concoct sodas from natural ingredients on their own. 

There's plenty of money to be made, especially since Starbucks is charging more for its soft drink offerings than it does for comparably sized black coffee servings. If it can lead the way in crafting -- handcrafting, if you will -- a market for premium soft drinks, the Fizzio push could move the needle in a good way for SodaStream and even for a company as large as Starbucks itself.

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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

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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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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