SODA - SodaStream

[CONeal]

Out of curiousity sake I looked at the Sodastream and Flavorstation (the actual product).  Looks like Flavorstation has a lower cost of ownership when you factor in the CO2 canister refills.  The canister can be refilled at Dick's for $4.99 for Flavorstation (not actually being promoted this way) since they use a basic paintball cannister.  Sodastream has to be sent in to the company at a cost of $49.

[tooskinneejs]

Just remembered another one that was hot for a couple of years - the panini press.

[Parsad]

Just remembered another one that was hot for a couple of years - the panini press.

 

Yeah, panini press was huge too!  You can buy those, along with breadmakers at garage sales now for $20!  ;D  Cheers!

[ragnarisapirate]

Out of curiousity sake I looked at the Sodastream and Flavorstation (the actual product).  Looks like Flavorstation has a lower cost of ownership when you factor in the CO2 canister refills.  The canister can be refilled at Dick's for $4.99 for Flavorstation (not actually being promoted this way) since they use a basic paintball cannister.  Sodastream has to be sent in to the company at a cost of $49.

 

it is $15 bucks to swap them out at most wal-marts, williams and sonoma, miejer, and Bed Bath and Beyond...

 

 

[ragnarisapirate]

Just remembered another one that was hot for a couple of years - the panini press.

 

Yeah, panini press was huge too!  You can buy those, along with breadmakers at garage sales now for $20!  ;D  Cheers!

 

When was the last time that you ate several panini's a day? What about used a crock pot that much? I like crock pot food, but, would go cray if i ate it every night. I however, have yet to meet the person that has gotten sick of drinking soda all the time... People generally cut back for health or budgetary reasons. Sodastream can actually help with both, to some extent.

 

As Buffett has said, Coca-Cola (or rather cola) has no taste memory... I think that you guys are comparing apples and oranges.

 

I almost get the feeling like I am arguing my way into buying this stock. ;)

 

EDIT:

 

Plus, SODA has a degree of continuing revenue through CO2 refills and the syrups, whereas crock pots, just like GE microwaves, are one trick ponies. Furthermore, Sodastream has free advertising for their syrups and such whenever you make a soda in your kitchen. That is a pretty impressive thing psychologically. I am not saying that we will use the product in 10 years, but, I am saying that there is a really neat situation developing. I have bought a few shares, as this is interesting enough for me to gamble a small amount on.

[biaggio]

I saw one of these being demonstrated in my local Costco store.  I sampled the cola flavor, which was fine.  My impression was that using the machine would involve a little too much clean up work after each use to make it worth my while.  I have friends who have, over time, bought bread makers, juicers, etc.; after a few months of heavy use they all start collecting dust.

 

Don't forget slowcookers!  My cousin swore by hers when this slowcooker fad started a couple of years ago.  She cooked with it at least 3-4 days a week...the convenience, tender meats, efficiency and savings were all touted.  It now sits in her cupboard and gets used once every couple of months!  Cheers!

 

I have a Vita-Mix, not sure if anyone here has one, but it is an awesome kitchen gadget.  I may not be using it regularly in a year or so, but for now I really enjoy it!

 

Vita mix is awesome.

 

Great way to improve diet...have been putting 5-6 cups of spinach in my smoothy in the morning. It so powerful it just pulverizes it. You don t taste the spinach provided you use with frozen berries or add a lemon for instance. Have used kale, other greens as well. Prior to that I struggled to get my 10 servings og fruit + veggies!

[motownsf]

I saw one of these being demonstrated in my local Costco store.  I sampled the cola flavor, which was fine.  My impression was that using the machine would involve a little too much clean up work after each use to make it worth my while.  I have friends who have, over time, bought bread makers, juicers, etc.; after a few months of heavy use they all start collecting dust.

 

Don't forget slowcookers!  My cousin swore by hers when this slowcooker fad started a couple of years ago.  She cooked with it at least 3-4 days a week...the convenience, tender meats, efficiency and savings were all touted.  It now sits in her cupboard and gets used once every couple of months!  Cheers!

 

I have a Vita-Mix, not sure if anyone here has one, but it is an awesome kitchen gadget.  I may not be using it regularly in a year or so, but for now I really enjoy it!

 

Vita mix is awesome.

 

Great way to improve diet...have been putting 5-6 cups of spinach in my smoothy in the morning. It so powerful it just pulverizes it. You don t taste the spinach provided you use with frozen berries or add a lemon for instance. Have used kale, other greens as well. Prior to that I struggled to get my 10 servings og fruit + veggies!

 

 

Agree on the Vitamix!

[Eric50]

Very positive article in Le Monde on how to prepare your own soda at home with some pretty negative comments from some French readers. Key points:

 

- Home making soda is presented as a fun, simple, healthy, cheap and ecological way to quench thirst;

- SodaStream is mentioned at the end of the article as a source for buying a machine;

- Expected savings of EUR120 pa for people consuming 1l every day;

- In the comments section, a reader mentioned that SodaStream has a "factory in Mishor Adumim/Ma’ale Adumim, an illegal israeli colony in Cis­jor­dania, in an occupied Palestinian territory". I don't know if this is true or not but it triggered several negative comments from other readers;

- Kefir is mentioned in the comments as a substitute product...lol...

 

http://alternatives.blog.lemonde.fr/2012/06/28/comment-faire-son-soda-maison/

[mpauls]

I risk looking like an idiot since I know nothing about this company, but I think they will go broke.

[Arden]

I live in Israel, and here, there was also a Sodastream fad a couple of decades back. EVERYONE had one. The company is headquartered here still today if I am not mistaken.

 

Sodastream was really popular for a few years(maybe more than a few- more like 10-20 I guess) but now no one has it. The company doesn't even try to advertise in Israel even though it was so popular here. Why? because when the fad passes, nothing can bring it back.

 

The only reason people can consider investing in SODA is they haven't expirienced the fad passing as it did here. I hope it does well, but wouldn't invest in it, I might even consider shorting it , but that would be really anti-nationalistic of me :)

[Eric50]

WSJ article on SodaStream's ambitions.

 

http://online.wsj.com/article/SB10001424127887323894704578115060945709602.html

[Josh4580]

http://video.cnbc.com/gallery/?video=3000130705&__source=yahoo%7Cheadline%7Cquote%7Cvideo%7C&par=yahoo

 

Great Interview with Sodastream CEO Daniel Birnbaum on CNBC

[cpan]

Great discussion!  Every post was informative.  My limited 2 cents is that maybe this have to be looked from a time frame point of view. 

 

Short term:

- SODA is first to market, lack of competition, shining new object in the kitchen effect

- So if they show enough growth short term, mr. market will probably given them a really high multiple for being the potential Coke killer (good PR story that sells well)

 

Long term:

- No barrier to entry.  (for example, the K-cup has a few competitors and not exactly obvious how they will differentiate themselves)

- Coke/Pepsi will respond (great if they buy SODA but thats too tough to say given SBUX plan to come out with their own machine and nothing would prevent coke to do so)

 

My problem with SODA is that:

- do I want to make my own soda to save money but also have to do the extra work? 

I would say that in developed wold, the average consumption of cola per person is not that high and it really peaks demographically at teen and early 20s.  I can't see teens or young adult buying a machine to save money on their cola consumption (also I was very lazy at that age which I think is typical). 

- In developing world, SODA has a big initial outlay which would limit its market.  I can't see people making less than $20 a day spending $100 buying a machine to save money on their cola consumption. 

[Sportgamma]

With regards to the threat of competition in the self-carbonation market:

 

The underlying mechanism is pretty simple: When a company extends a product line, it often raises the prices of its existing products. The hikes might be designed to make the new product look cheaper and thus more attractive by comparison or to capture the value customers place on a broader line of offerings. As that company adjusts its pricing, its competitors can follow suit without risking customer defections over price.

 

Consider what happened when Yoplait became the first major producer to market low-fat yogurt in the United States. Although Dannon took a 5% hit in units sold during the new product’s initial year, the vast majority of its customers didn’t defect to Yoplait; they preferred Dannon’s style of yogurt. And because Yoplait had raised prices across its product line, Dannon raised its prices as well, by more than 10%. So despite the 5% decrease in volume, Dannon’s revenue increased by 5%.

 

A similar dynamic plays out in fast food. My research shows that McDonald’s franchisees who open additional outlets (a form of horizontal product extension) often price the menu items in all their locations higher than before, allowing competing Burger Kings to raise their prices as well. At independent Burger Kings in Silicon Valley, this has led to increased margins more than 10% of the time.

 

The pattern holds for consumer goods as well. I looked at what happened to Pampers when the number of Huggies varieties available in a particular supermarket increased. Here, too, average revenue grew, because as additional Huggies products were stocked, both brands raised their prices. I observed the same phenomenon with coffee, peanut butter, soup, spaghetti sauce, and toothpaste—goods for which two major brands were in competition. In 40% to 60% of the instances in which one brand significantly increased its presence on a retailer’s shelf, its competitors’ profits grew.

 

 

http://hbr.org/2013/04/you-can-benefit-from-a-rivals-new-product/ar/1

[Sportgamma]

Birchbaum on Investor Day:

 

"CO2 refills are fuelling a bigger base of consumers, so growth in CO2 is often much bigger base, the base being the community of all of our users, while the soda makers or often zero base, every year. I mean it’s a new number every year. So of course you get a bigger number [in soda maker volume growth]. You can compare it to golf balls and golf clubs."

 

“The focus is household penetration. Get that new user! And after you get the user, keep the user!! We call that loyalty or retention. With a great product, with reinforcement of the benefits. That’s it! We don´t need McKinsey or other…BCG…to give us a big manual for a million dollars to tell us what our strategy is. We know what it is and we´re very focused on it and it has not changed in six years. Our goal is to be a billion dollar company by 2016. They told me not to say…but I want do it earlier…so I´m not saying it.”

[stahleyp]

Big kudos to moore on this one (though I didn't listen...unfortunately).

 

Some takeover rumors

 

http://news.morningstar.com/all/dow-jones/us-markets/201306061005/000355/pepsico-denies-sodastream-talks-report.aspx

 

PepsiCo Denies SodaStream Talks Report

[snailslug]

Sodastream's New Mainstream Rivals: Coke and Green Mountain

 

http://www.businessweek.com/articles/2014-02-05/sodastreams-new-mainstream-rivals-coke-and-green-mountain

[Spekulatius]

We are users of Sodastreams product and typically use it, just to make our carbonated water. I don't care about the flavors and in fact we do our own flavors with juice sometimes. But most if the time, we just like to drink the carbonated water, like I am used to coming from Europe.

 

I think the convenience  as well as environmental aspect of having not to lug around heavy water containers and  throw away the packaging should not be underestimated for an urban household, which may not even own a car.

 

Also, companies other than Sodastream could easily offer their own flavors to mix with the carbonated water. I wonder about the strength if Sodastreams patent protection  - the principle to created sparkling water has been around forever (in bars for example).

[LC]

Have they partnered with Amazon yet to deliver/pickup refills yet? Would make my life so much easier...

[Avyalake]

This thesis makes sense. Coke just gave credence to the at-home soda market (at least for a while)?

http://www.citronresearch.com/wp-content/uploads/2014/02/SODA-final.pdf

[original mungerville]

I think carbonated water at home can compete with ALL of Pellegrino's and Perrier's and Evian's lower end carbonated water competitors. You don't have to carry the bloody crates home, taste is exactly the same, its less than half the price, its more environmentally friendly. Hey, if you have visitors and want to serve them the branded stuff, just keep a couple bottles handy.

 

The way I see it, its the carbonated water equivalent of drinking your daily wine, which may be cheaper than the wine you might serve when you have visitors over. I could see this occur in Europe where they drink tons of carbonated water (and wine!) daily.  So, in my mind, without question this carbonated water at home product will put a dent into the carbonated water market. A similar conclusion can be reached for soda (albeit strong brands like Coke will play a role there).

 

There will be a dent over time that will be substantial in my view. It will impact the soda and carbonated water markets. I think what's interesting here is to distinguish between soda and carbonated water - I think brand matters less with the latter and the at-home convenience thing and low costs supersede the brand-factor for the latter. So there will be a major dent made in that market. 

 

Having said all this, how does SodaStream protect its return on capital?... as I could easily see a large grocery retailer in Europe providing their own carbonated system, provide the cartridge returns, and partner with a branded soda companies, etc...

 

Those who say this is a fad and it won't dent the carbonated market and therefore don't by SODA stock are completely wrong. Those who say don't buy SODA stock because their earnings do not have a huge moat around them make more sense to me. Any views on the size of moat, if any?

 

[original mungerville]

This thesis makes sense. Coke just gave credence to the at-home soda market (at least for a while)?

http://www.citronresearch.com/wp-content/uploads/2014/02/SODA-final.pdf

 

The thesis that carbonated systems will put a dent into the bottled water and soda markets is clear. The problem for SODA is: what's its moat? Couldn't a large retailer just develop its own system with the retail distribution already in place? At this point, it is no more than a quick way for Pepsi to copy Coke - that may be enough...its not that expensive given its growth but... its not a business that I would feel comfortable owning for the next 10 years unless someone can convince me there is some sort of moat around the earnings. I mean just buy the call options or LEAPs if you want to bet Pepsi will buy them out. Why buy the stock?

[Spekulatius]

This thesis makes sense. Coke just gave credence to the at-home soda market (at least for a while)?

http://www.citronresearch.com/wp-content/uploads/2014/02/SODA-final.pdf

 

The thesis that carbonated systems will put a dent into the bottled water and soda markets is clear. The problem for SODA is: what's its moat? Couldn't a large retailer just develop its own system with the retail distribution already in place? At this point, it is no more than a quick way for Pepsi to copy Coke - that may be enough...its not that expensive given its growth but... its not a business that I would feel comfortable owning for the next 10 years unless someone can convince me there is some sort of moat around the earnings. I mean just buy the call options or LEAPs if you want to bet Pepsi will buy them out. Why buy the stock?

 

I don't see a moat In making carbonated water. Those machines have been around in Europe before Sodastream hit the market in the USA. In Europe, several Soda machine systems have coexisted including Sodastream.

 

[http://translate.google.com/translate?hl=en&sl=de&u=http://www.dooyoo.de/trinkwassersprudler/soda-maxx/783426/&prev=/search%3Fq%3Dsprudel%2Bmacher%26client%3Dsafari%26hl%3Den/url]

[dartmonkey]

 

Having said all this, how does SodaStream protect its return on capital?... as I could easily see a large grocery retailer in Europe providing their own carbonated system, provide the cartridge returns, and partner with a branded soda companies, etc...

 

Those who say this is a fad and it won't dent the carbonated market and therefore don't by SODA stock are completely wrong. Those who say don't buy SODA stock because their earnings do not have a huge moat around them make more sense to me. Any views on the size of moat, if any?

 

I don't think it's a fad, it's a genuinely useful product, primarily because it allows you to stop schlepping cases of carbonated liquids into your house, storing the empties, taking them back, and getting the credit, one of my most hated routines.

 

The moat is not impenetrable, but it is not insignificant. Sodastream has become the de facto word for a system that carbonates your water. If you bought another unit, you would have to explain to your friends that it's a machine 'like a Sodastream'. If that's not a moat, I don't know what is. Of course others are free to offer their own systems, perhaps undercutting Sodastream on price, but to do that, they need to either get some volume, i.e. the volume that Sodastream already has, or accept that there will be big losses for many years as they build scale. My hope as a SODA investor is that the market is just not big enough to be worth losing a lot of money on. Sodastream could maybe scale up to about 10 or 20 times bigger than it is now, with maybe 20-40 times today's profit levels, and still that amount of profit would be a rounding error for some big company that might be interested in this market. I suspect that is why Coca-Cola doesn't bother - they take a stake in Green Mountain's effort, which I doubt will succeed, but they don't try to set up an enterprise themselves.

[PatientCheetah]

 

Having said all this, how does SodaStream protect its return on capital?... as I could easily see a large grocery retailer in Europe providing their own carbonated system, provide the cartridge returns, and partner with a branded soda companies, etc...

 

Those who say this is a fad and it won't dent the carbonated market and therefore don't by SODA stock are completely wrong. Those who say don't buy SODA stock because their earnings do not have a huge moat around them make more sense to me. Any views on the size of moat, if any?

 

I don't think it's a fad, it's a genuinely useful product, primarily because it allows you to stop schlepping cases of carbonated liquids into your house, storing the empties, taking them back, and getting the credit, one of my most hated routines.

 

The moat is not impenetrable, but it is not insignificant. Sodastream has become the de facto word for a system that carbonates your water. If you bought another unit, you would have to explain to your friends that it's a machine 'like a Sodastream'. If that's not a moat, I don't know what is. Of course others are free to offer their own systems, perhaps undercutting Sodastream on price, but to do that, they need to either get some volume, i.e. the volume that Sodastream already has, or accept that there will be big losses for many years as they build scale. My hope as a SODA investor is that the market is just not big enough to be worth losing a lot of money on. Sodastream could maybe scale up to about 10 or 20 times bigger than it is now, with maybe 20-40 times today's profit levels, and still that amount of profit would be a rounding error for some big company that might be interested in this market. I suspect that is why Coca-Cola doesn't bother - they take a stake in Green Mountain's effort, which I doubt will succeed, but they don't try to set up an enterprise themselves.

 

SODA is more mature in some markets. If it can show that it retains tractions in some of its mature markets, I am much more inclined to buy into its weather/bad marketing excuses. Anyway, Q2 will be the show me quarter because it can't use the weather excuse. I hope this is similar to DECK and CROX. DECK is overearning and CROX is underearning now because we have had an unusually severe winter.