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SodaStream Is All Set To Take Off

November 29, 2013 | About:
abirk

abirk

3 followers
Sodastream International Ltd (SODA), the company behind the popular namesake beverage platform that turns tap water into sparkling soda is surely a company to watch out for. In an effort to expand their presence as well as combat waning sales in the perceived "unhealthy drinks " arena, beverage companies via partnerships or their own research team -- are bringing new products to market to entice consumers. SodaStream markets itself to consumers who consider themselves socially and environmentally responsible. It mostly marketed to health-conscious consumers. According to Yonah Lloyd, SodaStream’s chief corporate development and communications officer, “Home soda making is still a new category in the U.S. with over 98% of homes as potential customers”.

Recent Performance

SodaStream posted a 29% increase in revenue in the most recent quarter, prompting management to raise full-year guidance for revenue growth to 30%. The The company now expects full year 2013 revenue to increase approximately 30% over 2012 revenue of $436.3 million. Adjusted EBITDA is expected to increase approximately 38% over 2012 Adjusted EBITDA of $61.1 million.

Looking Ahead

The Israeli maker of home soda machines can continue to grow at 30% in the rest of 2013 and 2014. With an expected growth rate of $1 billion, and revenue and net margins of 15%-18% by 2016, it is reasonable to assume that there will be no looking back for this company. Shares of this company have plenty of room to double or triple over the next three years. SodaStream's long term guidance denotes reaching $1billion in revenues by 2016.

The company announced that it has roughly 16,000 points of retail distribution of its products in the United States to meet the anticipated demand . Retailers have already begun to allocate additional shelf space for SodaStream products. In addition to the continued expansion of distribution channels both in the United States and internationally, SodaStream continues to build its moat through innovation. Examples range from built-in SodaStream systems in Samsung refrigerators, Whirlpool's upcoming debut of KitchenAid soda makers using SodaStream technology.

SodaStream has been investing in its TV commercials, adding additional production to its global facilities , and buying up its distributors in Italy and Canada to have more control of its operations. SodaStream's latest quarter finds it selling 27% more starter system kits than it did a year earlier, so the number of people exploring the simplicity and convenience of making soft drinks at home continues to grow. SodaStream has also updated its actual maker, including newer models that eliminate the guesswork of deciding the level of carbonation by manual operation. There are also SodaCaps , which are single-serve flavored capsules that eliminate the need for pouring syrup out of a bottle.

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Graph from TheStreet.com



Ending Note


SodaStream products are sold in over 64,000 retail stores in 47 countries including home & electrical appliance stores, hypermarkets, supermarkets , department stores, convenience stores. Companies like SodaStream have the potential to add to shareholder’s wealth. Given the tremendous addressable market, soda companies can continue to march forward.

The company has successfully managed to beat analysts' estimates each and every quarter. SODA commenced its IPO in 2010; the stock has more than tripled in value from that time . Partnering with Kraft Foods is also a potential move taken by the company. This is a strategic step taken by SodaStream, as it should increase consumer awareness and credibility for both the brand and the home carbonation category. Soda makers offer a highly differentiated and innovative solution for consumers of bottled and canned carbonated soft drinks and sparkling water. Going by my opinion, this soda giant won’t let its investors down . The company may continue to rake in more profits letting the investors to reap the benefits.

Rating: 4.1/5 (19 votes)

Comments

sana5000
Sana5000 - 10 months ago
I really like SODA a lot. Been following for about a year. It has huge potential and seems to be gaining market and mindshare in the US. there are potential competitors, like Starbucks(maybe) and Green Mountian, but they have an innovative business that is very attractive to families.Good article
abirk
Abirk - 10 months ago
Hi Sana5000, I am glad that you liked my article..
Tannor
Tannor premium member - 10 months ago
Abirk,

I had looked into the company when my roommates as well as friends down the street decided to purchase a machine each (two in total, around May&June) as well as almost every flavour available at the time (including the Kraft Kool-aid and lemonade) I was reluctant to buy due to the optimistic outlook priced into the company as well as high multiples in relation to my estimated IV at the time. It has come down since, although I am afraid not enough to perk my interests considerably.

The company is growing quickly and I could see further licensing agreements in the future provided the big players (Coke, Pepsi) do not hold out until patent expiration, (See Green Mountain Coffee) and make their own models to sell to the mass consumer. Another problem with the product that I have scene (from experience not in depth fundamental analysis) was that both my roommates and friends did not repurchase syrup when it ran out, nor did they repurchase CO2. The machine now sits on the kitchen counter un-used since August. For the time being the adoption rates of the units themselves should drive growth but I could see replenishment rates and patent expiration being a hinderance in the future.

Cheers,
SapientInvestor
SapientInvestor - 10 months ago
This is a very unique and disruptive company with an underestimated competitive advantage resulting from its CO2 distribution/exchange network. It is trading at around 16x forward earnings and a long runway for growth. I have a significant long position at around $58
AlbertaSunwapta
AlbertaSunwapta - 10 months ago
Adding them to refrigerators is brilliant. Still, it's hard for me to see them as not following the pattern of bread machines, exercise bikes, etc. - everyone gets them and soon afterwards, no one uses them.

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