SodaStream Deserves Some Respect

Somewhere along the way in recent weeks, SodaStream (Nasdaq: SODA  ) has become the Rodney Dangerfield of cola stocks.

My friend and fellow Fool Seth Jayson took a meaty jab at the Israeli company behind the portable water-carbonation system earlier this week.

"It sells an answer for a problem most people don't have," he writes. "How can I take up valuable counter space to make my own expensive soda at home?"

It's not a fair shot on both fronts.

For starters, I just measured my entry-level Genesis appliance. It's a mere five inches by nine inches, and since it doesn't require batteries or electricity it doesn't have to be within cord distance of a socket like most kitchen appliances.

The enclosed carbonator is good for 60 liters of carbonation, so is Seth suggesting that it's preferable to have 30 two-liter bottles -- or 169 soda cans -- in the cupboard or fridge? If the counter to that is that no one would ever stock that much pop in their home because they'll just lug the bottles and cans back and forth from the store as needed, then the cynic has arrived at one of the many reasons why SodaStream's convenience -- and environmental friendliness -- is making it so popular.

Then we get to the "expensive soda" knock. It costs just $0.25 to make a liter of sparkling water. Flavor it up with one of SodaStream's dozens of options and it's just $0.25 for a can serving. I'll be the first to admit that this isn't the kind of cost savings proposed by Green Mountain's (Nasdaq: GMCR  ) Keurig, where a roughly $0.50 K-Cup brews out a mug of premium joe, but it's certainly a lot cheaper than brand-name soda.

I thought the cynicism was silenced earlier this year, after Jim Cramer challenged Hank Greenberg to a taste test on CNBC. Greenberg had been ripping into SodaStream earlier this year, so Cramer proposed a live sip-off. Greenberg chose SodaStream over brand-name soda in two different blind taste tests.

I thought that the bears arguing that SodaStream would just be a 2010 holiday fad were quieted after the company's heady growth continued through the first half of this year. When even Best Buy (NYSE: BBY  ) began stocking SodaStream this summer, wasn't it time to stop calling a company that has been a success in Europe for years a passing craze?

SodaStream's shares were slammed this summer after failing to raise its guidance after a blowout quarter. It didn't help that the market was selling off at the time, but what's so wrong about a company that grows its revenue by 38% and its adjusted earnings by a whopping 161%?

Yes, Coca-Cola (NYSE: KO  ) and Pepsi (NYSE: PEP  ) are cheaper. They pay healthy dividends, too. However, if SodaStream is going to be knocked as a space-sucking appliance that makes pricey soft drinks, I'm going to fight back with facts. I'll also point out that SodaStream's nondiet sodas are way healthier than what's sitting on your grocer's shelves.

It's not just me. Sales and profitability will continue to shoot higher as more cynics come around. It has been a hot summer, after all.

If you want to see how the cola wars play out, add SodaStream International to My Watchlist.

The Motley Fool owns shares of Best Buy, PepsiCo, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee Roasters, Coca-Cola, SodaStream International, and PepsiCo. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Motley Fool newsletter services formerly recommended Best Buy. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. 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 calls them as he sees them. 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 (7) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2011, at 1:39 PM, TMFJoeInvestor wrote:

    I'll just put it on the counter next to my bread maker and George Foreman Grill. ;-)

  • Report this Comment On September 08, 2011, at 2:14 PM, megesquire wrote:

    Don't. know about the stick but every since we bought the basic model several years, we have not bought one bottle of seltzer. It is easy, convenient, environmentally friendly, and a great shower or wedding gift. I cannot imagine why anyone would knock the product. I would rather store an extra cartridge under the sink than a whole lot of bottles.

  • Report this Comment On September 08, 2011, at 2:39 PM, David369 wrote:

    If I drank soda I'd buy one just so I could experiment with flavor and carbonation levels. I do wonder if PRMW is going to be any competion as they are supposed to be coming out with a similar device.

  • Report this Comment On September 08, 2011, at 2:50 PM, NeedCoffeeNow wrote:

    Ever since my wife and I bought one at Costco, we drink less soda. Now we just use tap water with either a slice of lemon or lime. Saving on soda and deposit cost, as well as, no seltzer water at all from the store. Two thumbs up!!

  • Report this Comment On September 08, 2011, at 3:35 PM, spinner213 wrote:

    I have never taken my George Forman grill out of the package( xmas gift from sis) I have not bought a can of soda or seltzer since getting the soda stream in Dec. -thats the difference

  • Report this Comment On September 08, 2011, at 5:55 PM, upndn wrote:

    Nice bit on SodaStream.

    I'm thinking that as of now ($40) SODA is cheaper

    than KO on a Price/Sales and PEG and I will reduce the analysts 5 year forecast to 25% vs current 33% for that PEG calculation. The company is profitable and that will only grow with the sale of more razor blades.

    Someone should mail a SodaStream to Warren Buffet for a KO Insurance Hedge. ;)

  • Report this Comment On September 08, 2011, at 6:47 PM, Gunner14 wrote:

    One comment from SODA's CEO, last time he was on Cramer, had me buying shares the next day.

    One study found that 1 year after buying a unit, 80% of people were still using it! That, combined with glowing reviews on most sites I've checked, have convinced me that this is here to stay.

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