SodaStream Is a Best Buy

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.

The Motley Fool owns shares of Best Buy. Motley Fool newsletter services have recommended buying shares of SodaStream International, Best Buy, and Bed Bath & Beyond. One Motley Fool newsletter service formerly recommended Best Buy. 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.

Longtime Fool contributor Rick Munarriz is a fan of diet soft drinks and has owned a SodaStream maker since last November. 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.


Read/Post Comments (4) | Recommend This Article (5)

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  • Report this Comment On July 05, 2011, at 12:29 PM, David369 wrote:

    I think soda stream is going to be another green mountain. I still don't know if and/or how long green mountain will be around but all I can compare it with is the "Mr. Coffee" fad of years ago. Guess what, Mr Coffee is still around. Not like it was but that is probably only because of all the knockoffs that flooded the market. I think that aspect of the market will not happen to green mountain at this point since Tasso has been left in the dust. As such, I really don't see any competition for sodastream and all the green tree huggers have plenty to like about it as well as the penny pinching fall out from the economy. How can you not buy something that will save you money? Even the company is not "new". Heck, they have had plenty of practice with the European market and seem to have the knack over there. Selling in the States ought to be a breeze compared to that market. No, I don't own one but that's only because they don't have a decaf Mountain Dew flavor or any other flavor I like. I figure that will eventually change and I will buy one. Untill then I will enjoy watching their progress.

  • Report this Comment On July 05, 2011, at 1:49 PM, rtjkrj wrote:

    Think "product life cycle" before you buy this stock.

    I have personally worked on at least four of these schemes over the years, and none are alive today. Also compare a price of a case of the majors at Costco or Walmart with your cost per case for those co2 bottles and syrup packages plus caps plus new bottles . Whoopee! you are only paying 25% more to inject your own co2.

  • Report this Comment On July 06, 2011, at 9:38 AM, alpineer wrote:

    As I've mentioned before, there's also the issue of Sodastream's main production facility being located in Mishor Edomim. That's an Israeli settlement built illegally in the Occupied Palestinian Territories. And because of that, Sodastream is the object of a boycott. Companies like Veolia are paying dearly for being complicit with the Israeli occupation of Palestine.

    Not a good choice in my book, either economically or morally.

  • Report this Comment On July 06, 2011, at 10:55 AM, David369 wrote:

    @rtjkri

    From what I understand, you buy the bottle or a couple of them and then exchange them like the propane gas tanks for bbq grills, so you just buy the gas in the future. Still, I figure the company paints an overly optimistic picture of the true costs and if you are like me, located out in the boonies of Alabama. The closest place to exchange an empty gas bottle for a full one is about 40 miles away unless I wanted to do it by mail ($$).

    @alpineer

    Well, they have 10 or 12 production facilities. They could probably afford to built another if that one is lost. I doubt if anyone in USA knows or cares about the boycott. Although the politics of the Israeli people eludes my understanding, the Palestinian people don't seem to get many kind words regarding their compassion and charity to others. I'm just happy neither country is next door to us.

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