Pepsoda

Source: SodaStream.  

Last year's test where PepsiCo (NYSE:PEP) began to sell a new line of its branded flavors for SodaStream (NASDAQ:SODA) machines in select Florida markets apparently went pretty well. The two companies are expanding the offering, making the syrup capsules available through SodaStream's website and dozens of Bed Bath & Beyond across the country.

It's not cheap. A four-pack of Pepsi HomeMade, Pepsi HomeMade Wild Cherry, or Sierra Mist HomeMade will set you back $3.49, and these syrups are only good for half-liter servings -- unlike the traditional liter bottles that folks typically use with SodaStream beverage makers. It's fair to say that a 2-liter bottle of Pepsi or Sierra Mist won't cost you $3.49, and that's before factoring in the costs of carbonation. 

However, this is still an encouraging sign. The news delivered a boost to SodaStream's languishing stock, and it's inevitably going to stir up the rumors of PepsiCo buying SodaStream that initially surfaced two years ago. Let's cut to the chase: PepsiCo should buy SodaStream. Let's go over some of the reasons why the pairing makes sense.

1. SodaStream can be had for a lot less than before
The original published rumors out of SodaStream's home turf of Israel had PepsiCo shelling out $2 billion -- or $95 a share -- to acquire SodaStream. Obviously, it doesn't need to spend that much these days. 

SodaStream's market cap and enterprise value are a little more than $300 million these days. Even with a healthy buyout premium, we're talking about roughly $500 million to get the deal done. SodaStream isn't a quarter of the company it was two years ago. Yes, growth has gone the other way, but revenue is essentially where it was two years ago. PepsiCo has to believe that its global branding expertise would be able to revive sales, making this an opportunistic turnaround opportunity.

2. Getting closer to pop fans matters
You know you really like soda -- or at very least sparkling water -- if you invest in a SodaStream beverage maker. These are the people that consume enough carbonated beverages to buy a machine, and therefore they're no longer paying up for Coca-Cola (NYSE:KO) or Pepsi products. This isn't the reason why retail soda sales have fallen every year over the past decade, but it clearly isn't helping. 

Owning SodaStream would give PepsiCo access to die-hard soda sippers. Whether it's taking the audience's pulse to roll out products of its own or trying to bring them back into the store-bought fold, it's a niche audience that PepsiCo shouldn't ignore.

3. SodaStream may not be this cheap forever
These are dark days at SodaStream. The stock recently hit all-time lows. Adjusted revenue for its latest quarterly report clocked in with a brutal 28% year-over-year drop. However, high-margin CO2 refills moved higher, proving that folks that own the machines continue to use them.

SodaStream has at least two new platforms that it will introduce next year. SodaStream Mix has technology that allows any liquid to be carbonated, opening up the possibilities for foodies, creative eateries, and hobby mixologists to stretch the boundaries of what's possible with carbonation. The other potential game changer is SodaStream Ultimate, a machine that makes purified and filtered hot and cold beverages. It's the company's response to Keurig Kold.

Coca-Cola has already picked a side, making a 10-figure investment in the company behind Keurig Kold. If the cola wars are real -- and there are no signs that Coca-Cola and PepsiCo have any interest in a cease-fire -- it makes perfect sense for PepsiCo to bet on Ultimate, where it can easily have a minority stake in SodaStream if not buying it outright. 

If either Mix or Ultimate takes off so will SodaStream, and PepsiCo getting in now would make sure that it doesn't pay off later while at the same time opening up the global opportunities for SodaStream.

Rick Munarriz owns shares of SodaStream. The Motley Fool owns and recommends PepsiCo. It owns shares of SodaStream and has the following options on Coca-Cola: long January 2016 $37 calls, short January 2016 $43 calls, and short January 2016 $37 puts. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. 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.