Soda Stream International Case Analysis

By: Indah Puspita

Nim : 2401140074

1. Executive Summary

SodaStream International Ltd. (SodaStream) engages in the manufacturing, distribution and

marketing of home carbonation systems that enable consumers to transform ordinary tap water
instantly into flavored carbonated beverages such as carbonated soft drinks and sparkling water.
As health and environmental concerns over pre-packaged soft drinks have grown, so too has the
company. As a result, the company has recently been reported as a potential acquisition target for
heavyweights The Coca-Cola Company (Coca-Cola) and PepsiCo, Inc. (Pepsi) .Altough the
acqusition news proven not to be true , SodaStream has an exceptional financial results, but the
investor still worried that the Soda Stream system would lose its appeal to consumers as it had in
previous decades. This case study analyzes SodaStreams route to recent success and loss or
potential success and loss, and assesses if its worth to invest more in this company who bring a
revolution idea for CSD(Carbonated Soft Drink) insdustry to replace plastic soda bottles and what
is the next strategy that should be taken by SodaStream to win the CSD market.

2. Case Facts and Problem Identification

Soda stream manufactures home soda drinks maker machines, flavor

concentrates, and gas cylinders. Founded in 1903 as a subsidiary of W & A
Gibley gin distillers, the original SodaStream machines were marketed to British
upper-class customers. The machine, dubbed apparatus for aerating liquids by
inventor Guy Gibley, allowed us to convert ordinary tap water into carbonated
water by injecting compressed carbon dioxide gas (CO 2) into a container water.
Marketed to the upper class, the first SodaStream machine was installed at
Buckingham Palace. The company introduced flavored syrups in the 1920s along
with commercial machines, followed by the introduction of a home carbonation
machine along with a specially designed, durable plastic bottle, flavor
concentrate, and a CO2 gas cylinder .

According to Beverage Digest, the top 10 carbonated soft drink (CSD) brands
held just over 66% of the estimated &74 billion market in 2011. All of the top 10
brands belonged to Coca- Cola, PepsiCo, andDr. Pepper Snapple Group. Table 1
shows the distribution of market shares by company in the United States in 2011
as well as a listing of their brands and place on the top 10 CSD brand list.

Table 2 below show the effectiveness between CSD Advertising in boosting the
salesin US. Its showed that the bigger the spending point in advertising the
higher is the boost or change in sales.

The home drinks system was quite popular in the United Kingdom in the 1970s
and 1980s but languished in the 1990s and early 2000s as the company suffered
through several changes in ownership. Close to the bankruptcy, the firm
received a cash infusion from Fortissimo Capital and new management in 20.
Daniel Birnbaum, installed as SodaStreams CEO in 2007. Under Birnbaum, the
company modified its customer value proposition while retaining its tried and
true profit model, In order to build the brand, Birnbaum employed three value
drivers that took advantage of major coial trends : rising consumer interest in socalled green products; increasing consumer concerns over health and
wellness , especially obesity ; and the apparent change in the zeitgest away from
conspicuous consumption and toward frugality. As a result , the management
team began to position SodaStream system as an environmentally sound and
helathy alternative to prepared carbonated soft drinks.

Financial Result
The company sold its products in 60.000 stores and 45 countries in 2012. A
realtive newcomer to the U.S. market, SodaStreams US sales were conducted
through 15000 stores, including Williams Sonoma, Best Buy, Wal Mart, and
Target. As table3 shows , the company s 2012 revenues in the Americas were
about $158 million up from about $41 million in 2010. The majority of the
companys revenues in the America were generated by sales in the US market.
Overall revenues had more than doubled from $208 million to $ 436 million in
two years . At the same time, opertaing profits more than tripled and net income
in 2012 skyrocketed to nerly three and a half times net income in 2010. With $62
million in cash and no debt, Soda Streams balance heet was a strong one. Yet,
the company was dwarfed by its larger CSD competitors.

Despite the companys exceptional financial result, investors worried that

SodaStream system would lose its appeal to consumers as it had in previous
decades. With no buyout in sight, the company had to continue to perform on its
own to keep the stock market happy.
Moreover, SodaStream bears pointed to the lack of significant bariers to entry for
a potential SodaStream competitor should the market become large enough to
attract large consumer products companies. A New gas cylinder factory might
only cost $100 million to build compared to billions to replicate the Coca Cola
or Pepsi bottling system in the US alone. SodaStreams product might be a
convenient alternative to prepackaged drinks at home, but U.S. consumers were
accustomed to being able to purchase a coke or pepsi nearly enywhere. The
huge popularity of the Coca-Cola freestyle drink-dispensing machine with its
125 different falvor options underlined the companys efforts to respond to
consumer demands for flavor variety suggested that SodaStreams flavor might
have some traction with customers.
Bottom line the real question is : if its worth to invest more in this company who bring a
revolution idea for CSD(Carbonated Soft Drink) insdustry to replace plastic soda bottles and what
is the next strategy that should be taken by SodaStream to win the CSD market.

3. Analysis

Soda Stream as one of the company in the CSD industry , have below strength
and opportunity compare to its competitors :

Healthconsciousness

SodaStream has begun to place a greater emphasis on healthy drinks, rather

than traditional sugary soda. However, the impact of the companys health
campaign is undermined to an extent by the fact that it also offers sugary syrups
for use with its machines. However, the degree of choice given to consumers is
the companys main advantage held in this area.

SodaStreamoperatesarazor/razorbladebusinessmodel

Although the SodaStream brand is synonymous with soda-making machines, it is

important to note that the company is not exclusively focused on sales of its
devices. In fact, the company operates a razor/razor blade business model,
whereby sales of SodaStream devices (the razor) serve as a driver for recurring
sales of affiliated consumable products, such as flavoring syrups, carbon dioxide
refills and carbonation bottles (the razor blades). These consumables are key to
the companys profitability, as they enjoy higher margins. Although this
diversifies SodaStreams product lineup, each product remains intrinsically
linked to another. Sales of consumables are directly dependent on initial sales of
the SodaStream device, but in order to maintain recurring sales, the longevity of
the products usefulness must be championed. This is crucial to the on-going
viability of the companys
business model.

Strategicpartnerships

In order to promote its own brand, SodaStream has entered into a number of
partnerships in recent years. This isa strategy the company used in the UK in the
1960s and 1970s, but its recent partnerships have had a clear US-centric focus.
Branding partnerships with well-known products from the likes of Kraft Foods
Group, Inc. (Kraft) have helped SodaStream gain a sense of legitimacy amongst
wary US consumers, thus effectively promoting its soda makers and consumable
products. Furthermore, the companys partnerships with leading designers and
Samsung Electronics Co.,
Ltd. have served to premiumize its device offering, lending credence to the
supposed longevity of the product. SodaStream has used existing brand power to
boost its own brand , in addition to offering its own branded flavors of soda
syrups, SodaStream has historically offered branded flavors. For example, in the
UK, SodaStream offered flavors such as Vimto and Tizer, two popular UK-centric
brands of soda. However, the company has looked to buy its recent focus on the
US by entering into strategic partnerships with established players in the US
soda market.

Newfocusonenvironmentalismandhealth

SodaStream now claims that its products are environmentally friendly, cost
effective, promote health and wellness, and are customizable and fun to use.
The environmental advantages of its soda makers are a key area that the

company has focused on during its marketing campaigns. Furthermore, the

company has aimed to place an emphasis on healthy lifestyles and nutrition with
regards to its complementary consumable products, as it looks to capitalize on
consumer
movement away from conventional pre-packaged soda products.

SodaStreamasanEarthFriendlyproduct

While earlier focus was on the fun nature of the product, SodaStream now
promotes itself as an Earth Friendly company, and claims that its devices are
active green products, with which consumers are able to actively reduce their
impact on the environment thanks to reduced transport, packaging reduction
and packaging reuse.

SodaStreamhasagoodfinancialresult

The company sold its products in 60.000 stores and 45 countries in 2012. A
realtive newcomer to the U.S. market, SodaStreams US sales were conducted
through 15000 stores, including Williams Sonoma, Best Buy, Wal Mart, and
Target. As table3 shows , the company s 2012 revenues in the Americas were
about $158 million up from about $41 million in 2010. The majority of the
companys revenues in the America were generated by sales in the US market.
Overall revenues had more than doubled from $208 million to $ 436 million in
two years . At the same time, opertaing profits more than tripled and net income
in 2012 skyrocketed to nerly three and a half times net income in 2010. With $62
million in cash and no debt, Soda Streams balance heet was a strong one.
Below is the SodaStream Weakness :
-SodaStream bears pointed to the lack of significant bariers to entry for a
potential SodaStream competitor.
-SodaStreams product might be a convenient alternative to prepackaged drinks
at home, but U.S. consumers were accustomed to being able to purchase a coke
or pepsi nearly enywhere.
-The huge popularity of the Coca-Cola freestyle drink-dispensing machine with
its 125 different falvor options underlined the companys efforts to respond to
consumer demands for flavor variety suggested that SodaStreams flavor might
have some traction with customers.

4. Conclusion and Recommendations

SodaStream as a company still have a lot potential to growth , the investor

should not lose hope to invest in this company. Some improvement need to be
taken within the Company like : improvement of flavour variety , building A New
gas cylinder factory to be able to compete in a larger market. And creating more
powerfull strategy in branding and marketing , advertising included. Since many
people in arround the world still dont know the SodaStream brand , the company
need to plan a powerfull and smart advertising around the media and internet
that able to reach in every layer of people and society that could empower the
SodaStream brand . The marketing divison need to come up with better strategy

in how to sell Soda Stream products not only in UK and US but also in ther part of
the world like Europe or Asia.

Refference
1.
2.
3.

Zekaria, S. (2012). SodaStream fizzes up globalmarket for carbonated and flavored drinks.
The Wall Street Journal. November 13.
Reuters Tel Aviv. (2013). PepsiCo in talks to buy SodaStream for $2 billion. June6,
www.reuters.com\article\2013\06\06 \sodastream-pepsi-idUSL5NOEI0NI20130606.
Market line (2013). SodaStream International Ltd. Shaking Up the US soda market. July 2013.