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SodaStream Wants to Sweden You Up

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SodaStream (Nasdaq: SODA  ) announced a beefy milestone yesterday. It has now sold a million of its soda carbonation systems in Sweden.

This may not seem like a big number, but keep in mind that there are just roughly 4.5 million homes in Sweden.

The news isn't much of a surprise. SodaStream acknowledged its popularity in the Scandinavian country in its prospectus, singling out a 20% market penetration rate in Sweden. That would be nearly a million right there, and that's before we account for replacement purchases or homes snapping up additional soda makers.

SodaStream's next step: Turn us all into Swedes.

Home carbonation remains a niche offering in the United States, though SodaStream got plenty of help in pushing the concept over the holidays.

A successful IPO in November and a heavily promoted presence at Bed Bath & Beyond (Nasdaq: BBBY  ) and other houseware retailers during the seasonally potent December have put SodaStream on the map.

I bought a SodaStream system in November. I gifted my parents another for Christmas.

SodaStream may not be the cheap pop alternative it thinks it is. It costs $1.34 for a 64-ounce serving between the refillable CO2 carbonators and the flavored soda syrup. That's actually more expensive than most house brands. Home-brewed convenience can be a stronger argument, but Coca-Cola (NYSE: KO  ) and PepsiCo (NYSE: PEP  ) aren't going to be losing any sleep over the Israeli company.

SodaStream's real selling points are the health benefits of its natural sodas and the eco-friendly nature of mixing soft drinks at home instead of bringing it home in cans or plastic bottles.

On the health front, SodaStream's non-diet pop has a third of the calories, carbs, and sugar -- and far less sodium -- than traditional soda. Parents with fizz-addicted kids would be nuts not to consider SodaStream as a way to improve what their children are stuffing into their bodies.

SodaStream sold 449,000 systems, 2.6 million refillable carbonators, and a ton of flavored soda syrup during the third quarter. It likely sold considerably more of all three things during the holiday quarter.

SodaStream's model has been compared to Green Mountain Coffee Roasters (Nasdaq: GMCR  ) , since both companies rely on high-margin repeat purchases of beverage refills. The key difference between the two models is that we don't know if SodaStream will grow in popularity as it has in Sweden or if it will just be a passing craze.

The health benefits are too loud to ignore, though. We'll never be Sweden. SodaStream will never achieve 20% market penetration. However, it won't take much of a dent to move the needle here.

Is SodaStream the real deal or a passing craze? Share your thoughts in the comment box below.

Coca-Cola is a Motley Fool Inside Value selection. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers pick. Bed Bath & Beyond is a Motley Fool Stock Advisor choice. Coca-Cola and PepsiCo are Motley Fool Income Investor picks. Motley Fool Alpha has opened a short position on Green Mountain Coffee Roasters. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of 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.

Longtime Fool contributor Rick Munarriz is a fan of diet soft drinks. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (3)

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  • Report this Comment On February 01, 2011, at 6:41 PM, LQM2 wrote:

    KO and PEP come out with new sodas by the week. If health benefits were important to soda drinkers, they would have products out there in nanoseconds. SODA is no GMCR. I can't wait til they go optionable to buy put leaps.

  • Report this Comment On February 03, 2011, at 7:17 PM, pajpaj wrote:

    I absolutely love my sodastream. I love bubbly water and now I don't have to buy Perrier or San Pelligrino.

    I can make my own water and serve it with a lime. My guests love it. Forget the flavored mixes... you can make your own! Add half cranberry juice and half carbonated water and top with a slice of lime and add ice and you have a special beverage. So refreshing. I'm buying all of my family one of these machines for presents!!

    Forget the flavored mixes... you can make your own!

    I'm buying the stock too. Wish I had gotten it in the 30s.

  • Report this Comment On February 09, 2011, at 8:40 AM, rtekosky wrote:

    With all the benefits and style as well, remember that a 1% market share in the USA (great distribution is already established) makes this stock a winner. A big winner. I bought a month ago at 38.5, its at 43 today and I plan on buying more. After earnings season is almost over and the market fizzles a bit.

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