SodaStream's (NASDAQ:SODA) stock has slumped by 40% this year and by 20% in just the last three months. Investors are nervous that the maker of carbonated-beverage machine's planned global reboot from a soda-based brand to a sparkling water-based one might not succeed.

Last quarter's results didn't lesson those concerns. SodaStream posted a huge drop in sales and profits despite rising carbon dioxide canister usage.

That dynamic sets the stage for an important third-quarter report, due out from SodaStream on Wednesday, Nov. 4. Management in August said that they were expecting the business to make solid progress in the second half of 2015, so investors will want to see evidence of that turn in the latest results.

U.S. market performance
SodaStream has a strong presence in many markets around the world, but the company has pinned its hopes on winning in the United States. That's because one-fifth of all cold beverage consumption in the world happens here. And yet the company's at-home carbonation machines are only in 1.5% of homes, compared to as much as 15% or 20% in SodaStream's most successful markets.

SodaStream boosted advertising spending this quarter to support its strategic shift toward sparkling water and away from soda. Image source: SodaStream.

The U.S. operations tanked last quarter, with sales down 42%. But much of that pain was self-imposed. SodaStream deliberately slowed the delivery of its kits to retailers in preparation for the switchover to new machines and flavors.

Those products are on shelves now, and the company has been advertising the new brand heavily. Management is optimistic that the shift will bring growth back to the business. "We firmly believe this new strategic position will resonate strongly with consumers helping to reaccelerate household penetration in markets where our brand had been closely aligned with soda, such as the United States," CEO Daniel Birnbaum said in a July conference call.

Global carbonation usage
One of the few bright spots in last quarter's report was a solid uptick in carbon dioxide canister refills – the gas cans that power the carbonating machines. SodaStream sold 7% more of these refills (an acceleration from the prior quarter's 4% gain), as its base of customers grew to a record 6.9 million. These sales are the strongest evidence we have that current customers are making use of their machines, even as the company works to find ways to break through to reach new customers.

 

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Refill growth rate

17%

10%

17%

4%

7%

Growth pace of carbon dioxide canister refills. Source: SodaStream financial filings

If canister refills keep up their growth pace or post another acceleration, it adds weight to management's claim that it is struggling through a temporary branding issue. But a slowdown would be a red flag suggesting that SodaStream has even bigger problems to deal with.

Rollout plans and updated expectations


Image source: SodaStream.

Finally, investors should pay attention to what Birnbaum and his executive team have to say about how the strategic shift is playing out. This summer, they said the plan was for three waves of new product introductions, beginning in a few big markets including the U.S. before moving on to Europe in the fourth quarter and then hitting Canada, Australia, Switzerland and Germany early next year.

But the company is likely to have learned a lot about how to execute this complicated operational shift in the last three months. That's why it's likely that management will have important updates on the strategic reboot, and maybe even some changes to the three-step plan.

Without providing specific guidance, Birnbaum said SodaStream hopes to post smaller sales losses in the third and fourth quarter. Gross margin should contract slightly, and overall profits will be pressured as management spends heavily on advertising to support its relaunch. Investors will be looking for a more detailed outlook, now that the company has actual data on how customers are responding to its new look.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of SodaStream. 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.