Please ensure Javascript is enabled for purposes of website accessibility

SodaStream Is Hungry for Flavor

By Rick Munarriz – Feb 11, 2014 at 2:16PM

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

The pop star teams up with a realty show maven.

SodaStream (SODA) shares have been bubbly since Coca-Cola (KO 0.36%) invested $1.25 billion for a 10% stake in Green Mountain Coffee Roasters (GMCR.DL), but that doesn't mean that it's going to be quietly sipping mint juleps on the porch until PepsiCo (PEP -0.71%) arrives as a gentleman caller to sweep it off its feet.

SodaStream announced yesterday that it's teaming up with Bethenny Frankel's Skinnygirl lifestyle brand to create a line of better-for-you flavors that will jazz up SodaStream's carbonated creations.

It's a smart move, and not just because it's incremental to SodaStream's business. SodaStream will report quarterly results later this month, and if it's anything like the budding pop star's previous quarter, it's going to be a little light on flavoring. SodaStream's third quarter was disappointing as flavor unit sales rose just 7% worldwide and actually fell 3% in the United States.

This doesn't mean that SodaStream's portable small appliance is peaking in popularity. In fact, during those same three months it experienced a 34% spike in carbonator refills and a 27% surge in soda makers.

Folks are buying the namesake starter kits, hence the 27% pop. Folks who own them are using them, hence the 34% uptick in CO2 canisters. However, the appetite for flavored sodas hasn't been the same lately. The logical conclusion here is that a lot of people are buying SodaStream because they prefer carbonated water over still water, and they like the convenience of making fresh seltzer at home. Another reasonable explanation is that folks use SodaStream's fizzed carbonated water to mix with heartier libations.

SodaStream doesn't mind. There are generous margins to be had in the carbonation refills. However, it would also love to cash in on the high-margin syrup front, and here's where it's important to remember that Frankel's brand was birthed with the introduction of the Skinnygirl Margarita mix. In short, the brand already resonates in the drinking community.

These will continue to be interesting times for SodaStream. Coca-Cola teaming up with Green Mountain to introduce the rival Keurig Cold platform will be a defining moment for both companies. However, given that Green Mountain's success has been largely contained in the U.S. -- unlike SodaStream, whose product has penetrated several overseas markets at better rates than stateside sippers -- the door really is open for PepsiCo to beat Coca-Cola globally here by either teaming up with SodaStream or buying it out.

In the meantime, this is no time for mint juleps on the porch -- unless Frankel has a Skinnygirl flavor for mint julep.

Rick Munarriz owns shares of Green Mountain Coffee Roasters and SodaStream. The Motley Fool recommends Green Mountain Coffee Roasters. It recommends and owns shares of Coca-Cola, PepsiCo, and SodaStream. 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.

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 Stock Quote
SodaStream
SODA
Coca-Cola Stock Quote
Coca-Cola
KO
$62.48 (0.36%) $0.22
PepsiCo Inc. Stock Quote
PepsiCo Inc.
PEP
$182.59 (-0.71%) $-1.30
Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL

*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
351%
 
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 11/30/2022.

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.