SodaStream (SODA, Financial) has been sailing through troubled waters for quite some time and its third quarter results did not prove to be of any relief for the company. Its third quarter numbers declined on a year over year basis and failed to match the analystâs expectations. The weak numbers is mainly on account of sluggish demand for its soda machines and flavors. Consequently the stock has more than halved in the past one year and a bleak guidance provides an uncertain environment for the days ahead.
The way ahead
In fact, the numbers fell short of its own expectations and the management cites of challenging sales in the U.S and other markets. Increasing its focus on health and wellness the company curtailed on its advertisement spends as it was not fully convinced of its products, which negatively impacted its sales. This may seem to be a minor disappointment for the time being but SodaStream is determined to bring the company back on track and has made a blueprint of its growth plan.
On a global platform it had a choppy performance in Western Europe With softness in France, and to some extent in the Nordics and Italy. On the other hand, Asia-Pacific region reported robust results with a growth of 54% on a year over year basis. This was led by the Australian market, which benefitted from high consumer engagement along with the transition to its new generation soda makers.
And now the company is all set to gain from its strategic initiatives. It has marked out some key areas that will drive its growth, namely organization, marketing, product and innovation, distribution and operations. Starting with organization, SodaStream will bring new talents in leadership that will help to expand its e-commerce business even as it makes its transition to next generation products. But apart from recruiting new talents it will also reduce the unwanted workforce to turn the company into a nimble and efficient organization.
The marketing strategy
On to its marketing strategy, SodaStreamâs entire global commercial position will revolve around water plus positioning, which is in line with its concern for health and wellness. According to SodaStream CEO Daniel Birnbaum âWater and water plus products are the future of the beverage industry and we SodaStream can authentically own this valuable position within the beverage category.â Recent reports have shown that American adults and parents are reducing the use of soda in their homes. Instead consumers are shifting towards flavored water.
And the company is taking all necessary steps to tap this new trend. It has even changed its tag line to âWater Made Excitingâ, which resembles its move toward this new shift in interest. This in fact is its third pillar i.e. product and innovation. In this direction, SodaStream is set to launch its new water plus portfolio of sparkling water flavors with natural ingredients and no artificial sweeteners. But this new move will be in partnership with other brands, which will provide the company with an emergency exit. In case, if this proposition does not fit well with its water plus positioning, then the flavor will be branded under the partnerâs brand name, while it will pull back on use of the SodaStream brand.
And lastly the distribution and operation strategy will further focus on its health and wellness position. Recently, the company got the approval for its new facility in Lehavim, Israel, which will significantly enhance its manufacturing efficiencies. The company expects this new plant to become fully operational by mid 2015.
Conclusion
These are some significant developments that will play key role driving its growth in the days ahead. Currently the stock is near its 52-week low, and the management has provided a weak guidance for the coming months. For the entire year, SodaStream expects its net income to fall around 42%, while revenue is expected to fall 9%. Although, the company is making various changes to turn around its situation but it will be a matter of time to see how the stock reacts to these changes.
