A rough year for SodaStream (NASDAQ:SODA) investors took a breather on Friday after a deal was announced with PepsiCo (NASDAQ:PEP) to test a limited number of PepsiCo flavors for SodaStream machines. Yes, it seems as if you will be able to make some Pepsi-branded carbonated beverages with your SodaStream machine later this year.
It's important to note that this will be a short-lived trial in a very limited geographical area. Details in SodaStream's 6-K filing with the SEC were few, merely confirming that this is a limited test. The filing also points out that there are no more discussions taking place with PepsiCo outside of this commitment. The last thing PepsiCo needs is to see the same chatter that circulated in June of last year -- a story out of SodaStream's home turf of Israel claiming that PepsiCo was in talks to acquire SodaStream for $95 a share -- to get started again.
Industry watcher Beverage Digest has a little more color on PepsiCo's push into home-brewed pop, leaning on a source that claims it will be a 10-week test in select Florida markets through Wal-Mart and Bed Bath & Beyond stores.
The source claims the available flavors will be Pepsi Homemade, Pepsi Homemade Vanilla, Pepsi Homemade Wild Cherry, Sierra Mist Homemade, Sierra Mist Homemade Peach, and Sierra Mist Homemade Cranberry.
They key word in all of those offerings is Homemade. PepsiCo is hoping it won't be overly disruptive to its network of bottlers and retail distribution partners by differentiating its store-sold product from what consumers can make at home.
It's the right thing to do for both companies. SodaStream could certainly use the validation. It's holding up well in more established European markets, but it's been a stateside disaster since late last year. Having Pepsi products on board -- even if it's little more than a fizzy trial balloon -- could encourage more people to invest in a SodaStream machine. We saw this happen when Keurig Green Mountain (UNKNOWN:GMCR.DL) started inking deals for major coffee brands to put out licensed K-Cups.
This move also helps PepsiCo because the market has seen Coca-Cola (NYSE:KO) take a 16% stake in Keurig Green Mountain earlier this year, committing to the Keurig Cold platform that will be able to make carbonated beverages when it hits the market in the coming months.
PepsiCo's response before this test to follow Coca-Cola into home carbonation was a springtime deal with Malta's Bevyz, but that multidimensional maker of hot and cold beverages has yet to hit the U.S. market. That makes this holiday season's test with SodaStream PepsiCo its first foray in the once-promising at-home carbonation market. Just like the 2000 presidential election, there's a lot riding on Florida.
Soda consumption in general is slumping, particularly in this country, where carbonated beverage sales have inched lower for nine consecutive years. SodaStream's recent stateside failures magnify the problem, but could the catalyst for growth in this nascent niche simply be the ability for folks to make naturally sweetened Coca-Cola and Pepsi drinks on their own? We'll hopefully have an answer in the coming months.