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SodaStream Is Not Green Mountain

Rick Aristotle Munarriz
February 6, 2012

When java darling Green Mountain Coffee Roasters (Nasdaq: GMCR  ) soared 24% after posting blowout quarterly results last week, a budding pop star was latched on to its coattails.

Shares of SodaStream (Nasdaq: SODA  ) also moved higher on the report.

SodaStream "rose the most in three weeks as investors bet that higher-than-expected profit for Green Mountain Coffee Roasters will translate into higher earnings for the soda machine maker," read a Bloomberg article explaining SodaStream's nearly 4% ascent Thursday.

I'm sorry. This has to stop. I have no sympathy for a sympathy play when it's not fair.

Sympathy play for the devil
I'm a huge fan of both Green Mountain and SodaStream. I recommended both companies to Rule Breakers newsletter service subscribers at lower price points. I think both companies have ideal catalysts to make them market-thumping investments in the future.

There are similarities.

Both companies provide home-based solutions for beverage consumption. They are both growing quickly. Green Mountain's net sales surged 102% in its latest quarter. Analysts see SodaStream's top line climbing 38% when it reports its 2011 financial results later this month.

Each company also feasts on the razor and blades model. Green Mountain offers its Keurig single-cup brewers practically at cost, making that back on the sale of K-Cup portion packs. SodaStream's starter system opens the door for the higher-margin sale of soda syrups and proprietary carbonators that turn ordinary water into sparkling water.

However, I've never seen a scientific study that tethers an increase in coffee drinking to a boost in soft drink consumption. If anything, given Green Mountain's expansive push into "brewed over ice" cold coffee beverages, an uptick for one company may actually be a downtick for the other.

Do I think that's really happening? Of course not. SodaStream is going to crush it later this month. The fizz facilitator has beaten Wall Street's profit targets by 32% or better every single quarter since going public in 2010. There's no reason for that to stop now. My point is simply that these aren't identical bandwagons.

Raising razors
The worst argument for SodaStream calling "shotgun" on Green Mountain's joyride last week is the whole razor-blade model thing. If Green Mountain's better-than-expected report vindicates the model in which companies sell costly hardware at cost -- or even at a loss -- in order to make that up in time on consumables with generous markups, why stop at SodaStream? Why not rally behind Kindles, Xbox 360s, and -- duh -- Gillette razors?

Stand up and be counted, laser printers! This is your time to shine.  

No, it doesn't work that way.

Green Mountain and SodaStream don't even have the same model when you think about it. Green Mountain's "blades" are the now hundreds of varieties of K-Cups. Until the portion pack patents run out later this year, Green Mountain is either packaging the grounds or getting paid a welcome royalty on every unit sold.

There are no patents on SodaStream's syrup. Anyone can sell soft drink concentrate that can be poured into seltzer.

It was actually surprising to see Kraft Foods (NYSE: KFT  ) team up with SodaStream last month, agreeing to put out Crystal Light and Country Time syrups for SodaStr