There's a new pop star at Best Buy (NYSE: BBY ) .
SodaStream (Nasdaq: SODA ) was featured prominently in Best Buy's weekend ad circular. The consumer electronics giant is now selling the SodaStream water carbonation system, CO2 cylinders, and soda syrup flavor bottles.
Best Buy critics are going to have a field day with the deceptive nature of the ad. Best Buy is selling the starter kit for $99, claiming it is $40 off the regular $139 price. The problem is that everybody sells the same Genesis entry-level kit for $99. Bed Bath & Beyond (Nasdaq: BBBY ) has been selling it for $99 since it began stocking the system last summer, and patient shoppers can routinely pick it up for $79 given the 20%-off coupons that Bed Bath & Beyond loves to mail out.
Nice try, Best Buy.
Sidestepping the "sale" trick, this is a win-win for both parties.
SodaStream nabs another popular retailer, and this time it's not one that is primarily known for its housewares. SodaStream's been available through Bed Bath & Beyond, Williams Sonoma (NYSE: WSM ) , Macy's (NYSE: M ) , and other home-centric retailers since last year's stateside push by the Israeli company. Landing Best Buy will help SodaStream reach out to a different shopping audience, but one that is no stranger to carbonated fuel during computing, gaming, and home theater viewing sessions.
This is also a smart move for Best Buy. Stocking up on the syrup concentrate and carbonators that need to be replenished will result in repeat visits after the initial purchase. This is one of the reasons why Bed Bath & Beyond -- which unlike most distributors also swaps out the refillable CO2 canisters -- has become so closely associated with SodaStream's success. Retailers want to feature SodaStream prominently because they know it's more than just a one-time sale.
Best Buy used to be able to woo shoppers with discounted CDs, DVDs, video games, and books for years, but digital distribution of physical media has eaten into those sales. Same-store sales have fallen for four consecutive quarters. SodaStream isn't some magical "cure all" elixir, but at least no one is ever going to digitally download a diet root beer or fizzy energy drink.
I recommended SodaStream to Rule Breakers newsletter subscribers five months ago. There was plenty of skeptical resistance at the time, but the stock has gone on to pop 73% higher since being added to the service's scorecard. The stock hit a new high last week.
Those who figured that this would simply be a 2010 holiday novelty in this country -- despite healthy long-term momentum overseas -- have been proven wrong. Revenue and adjusted earnings climbed 50% and 141%, respectively, in this year's first quarter, fueled by the sale of 592,000 more starter kits and healthy growth in its higher margin consumables.
SodaStream and Best Buy are a good fit -- as long as Best Buy doesn't seriously believe that it can sell these $99 starter systems for $139 come next week.
Is SodaStream a fad or is it a real lifestyle changer? Share your thoughts in the comment box below.