Why This Company Is the Best Soda Playhttp://www.fool.com/investing/general/2014/01/21/why-this-company-is-the-best-soda-play.aspx Mark Lin
January 21, 2014
As consumers become increasingly health conscious, they are shifting from classic colas produced by Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) to low- or zero-calorie drink options. This bodes well for SodaStream (NASDAQ: SODA), a manufacturer and distributor of homemade soda makers. With SodaStream's soda makers, soda drinkers can get their daily dose of soda with two-thirds less carbohydrates, calories, and sugar than their regular off-the-shelf counterparts. SodaStream isn't just a great product for consumers--it is also an attractive investment play on the at-home soda market.
On the other hand, SodaStream estimates that the U.S. household penetration rate for home carbonation systems is at a low 1.1%. With Sweden's penetration rate estimated at 25%, there is ample room for SodaStream to grow further.
However, with the health and wellness trend contributing to lower CSD sales in recent years, it seems that while consumers have their favorite soda brand, there is nothing to stop them from switching away from sodas altogether. The key is that every soda sale is a one-off transaction -- Coca-Cola and PepsiCo must keep selling the same number of products every year to maintain the same revenue level as the previous year.
In comparison, SodaStream operates on a classic razor and razor blade revenue model. As SodaStream's installed base of customers who bought its soda makers