Please ensure Javascript is enabled for purposes of website accessibility

5 Things SodaStream Wants You to Know

By Demitri Kalogeropoulos - Updated Feb 22, 2018 at 1:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What management wants investors to take away from its recent earnings report.

Three years into its rebound plan and things have never looked better for SodaStream (SODA). Its pivot to a focus on sparkling water has returned the company to healthy sales growth while cost cuts powered record profitability in 2017.

In a recent conference call with Wall Street analysts, CEO Daniel Birnbaum said he sees room to expand on those gains in 2018, including by taking on global water giant Perrier on its home turf. Below are a few highlights from that chat (all quotes are Birnbaum's).

Two glasses of sparkling water with lime wedges sit on a cloth napkin.

Image source: Getty Images.

Sparkling growth

The fourth quarter ended up stronger than we initially expected as our strategies to expand household penetration and increased usage of our home carbonation system yielded very positive results.

Sales growth improved to a 20% pace in the holiday quarter compared to 13% in the third quarter and 10% in the second quarter. The company sold 25% more sparkling water machines, which allowed overall revenue to climb 14% for the year and edge past management's 13% target.

Higher margins

Gross margin increased 140 basis points to 53.8% in the fourth quarter. It is notable that this improvement was achieved while the sparkling water maker share in the revenue mix was 44%, 300 basis points higher than Q4 last year.

SodaStream enjoyed improving gross profitability even though the sales mix tilted heavily toward new machines that generate lower margins than its flavorings and carbon dioxide canister refill sales. That success is a testament to the company's improved manufacturing efficiencies and higher selling prices.

Standout regions

Our product, marketing and distribution strategies are driving expansion of our user base in our largest region and we still see a significant run rate for future growth.

Western Europe stood out by delivering more than half of SodaStream's revenue gain for the quarter on booming demand in Germany and easily offset sluggish growth in France. Sales in Canada surged, too, and the U.S. segment posted decent gains with help from an effective advertising campaign.

A big user base

Our user base now stands at an estimated 12.5 million households who collectively prepared and consumed 1.8 billion liters of carbonated beverage with our system during 2017, 90% of which was non-flavored sparkling water.

SodaStream posted an 11% increase in canister refill sales, which is evidence of both a growing user base and continued active machine usage by existing customers. The expansion solidified the company's position as the world's biggest water brand, by volume.

Plans for 2018

Looking ahead, we remain focused on executing our strategies, aimed at increasing household penetration, improving retention and driving long-term growth.

Management's growth plan includes a new one touch machine launch set for the second quarter of 2018 and a fresh lineup of flavoring options aimed at getting that segment back to growth.

A woman drinking soda water from a glass.

Image source: Getty Images.

SodaStream has aggressive plans to increase distribution. Its recent acquisition of its French distributor, for example, will allow it to compete more directly with sparkling water giant Perrier in its home market. Executives are hoping that new focus will help SodaStream bring its current 4% penetration rate closer to the double-digit rate it enjoys in some of its best markets.

Overall, sales are predicted to rise 12% in 2018, which would mark its first return to record revenue since the turnaround plan launched in 2015. Its far higher profitability, meanwhile, should result in operating income of about $89 million, or 80% above its previous record set in 2013.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SodaStream International Ltd. Stock Quote
SodaStream International Ltd.
SODA

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.