At-home beverage maker SodaStream International may have stopped the worst of its losses by moving to water and away from soda. Image: SodaStream International

If anyone was hoping SodaStream International (NASDAQ: SODA) would report another disappointing quarter, it had to be home-beverage maker rival, Keurig Green Mountain (NASDAQ: GMCR). After Keurig's competing appliance got the cold shoulder from the market, it needed its primary competitor in DIY drinks to stumble again, so that it wouldn't lose any more ground. However, SodaStream seems to finally be running in place instead of falling behind, which should be of great concern to Keurig.

Keeping its head above water
Stagnation is rarely good for business, but when you've fallen as far and for as long as SodaStream has, treading water is progress.

Although revenue tumbled 13% in the quarter and profits were hammered, plunging 76% from the year ago period, SodaStream's poor performance had more to do with currency exchange rates than its core business. Excluding the currency headwinds, results were close to even year-over-year.

Water, water everywhere
Right now, SodaStream is suffering from something of an identity crisis. Here in the U.S., it's undergoing a radical makeover, transitioning from a DIY soda maker to a sparkling water company.

Soda consumption, particularly diet soda, has been on a decade-long slide. Both Coca-Cola (NYSE:KO) and PepsiCo are still coming to grips with the tectonic shift under way in consumer beverage consumption habits. But again, that's largely something only being witnessed here in the U.S. Elsewhere around the world, it's not much of an issue.

In its own third quarter results, for example, Coca-Cola reported global unit case volumes rose 3% with sparkling beverages rising 2%, but North America soda case volumes continued falling just as they have been all along, declining 1% from last year even though there were more selling days this quarter than a year ago.

Ready to sparkle
In much of Europe and Asia, SodaStream is still very much a soda company. Only in certain countries like the U.K. has it made the switch to become a sparkling beverage maker, and early results are encouraging.

This is why investors might think it has an identity crisis. It keeps talking about water, but most of its business is still flavored.

And the U.S. market only accounts for around 15% of SodaStream revenue, so although it is a significant contributor to the total, its international business remains more important. Because it has to convert the sales it generates overseas into dollars, the improved performance it's seeing there is masked. For example, SodaStream is seeing double-digit percentage revenue gains in local currencies in places like Germany, Switzerland, and Austria.

Keurig Green Mountain's entrance into cold beverages got a frosty reception from consumers. Image: Keurig Green Mountain

A cold shoulder
The reason Keurig needs to be worried is that its rollout of the Keurig Kold appliance (which was developed in partnership with Coca-Cola) was largely seen as a failure and more harmful to itself than to SodaStream. Limited in distribution and overpriced, it missed a huge opportunity to steal market share from its rival. Had SodaStream continued its downward spiral, investors could at least hope Keurig would realize its mistakes and recover from the fumble.

But instead, SodaStream says the conversion to a sparkling-water company looks like it's stabilizing as its CO2 canister sales hit seven million units in the quarter, an all-time record. Starter kits and flavors may still be in freefall, but its installed base of customers are actually making more beverages than ever.

For a company like Keurig that is betting on high demand for soda (and other cold drinks), SodaStream's decision to instead keep making sparkling water is a concern.

Where's the growth?
But it has to be something of a concern for SodaStream as well. The erosion of its existing customer base may have halted, but it's not growing, either, and investors should understand the tumult that may occur when it does introduce the sparkling-water makeover elsewhere.

As CEO Daniel Birnbaum noted during the earnings conference call with analysts, the use of artificial sweeteners that precipitated the plunge in soda consumption in the U.S. is pretty much a non-factor elsewhere in the world. Therefore, when Sodastream reintroduces itself to customers as a health and wellness business pushing water, there may be an even greater rejection of the new model.

For the moment, though, it looks like SodaStream International has stemmed the worst of the losses, and even though it expects to see the same kind of diminished results next quarter, the company is expecting a revival in 2016. And a stronger competitor surely has to worry Keurig Green Mountain more than it lets on.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PepsiCo. The Motley Fool owns shares of SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola, short January 2016 $43 calls on Coca-Cola, and short January 2016 $37 puts on Coca-Cola. The Motley Fool recommends Coca-Cola and Keurig Green Mountain. 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.