SodaStream Just Changed The Game, Again

By Chad Henage - April 18, 2012 | Tickers: GMCR, SODA | 0 Comments

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In case you missed the announcement, SodaStream (NASDAQ: SODA) just changed the home soda-making game again. In the past, users complained that they didn't know when their CO2 cartridge was going to run out. SodaStream responded with the Fizz and Revolution machines that show you how much is left in your carbonator. This was a game-changing idea and makes it easier for customers to use the system and less likely they will be dissatisfied by an empty CO2 container. Now SodaStream is changing the game again. 

I've read reviews of SodaStream users and one of the few complaints about the system is that making soda with the right amount of flavor can be a challenge. If you put in too much syrup you get too strong a flavor, if you put in too little you get a weak drink. Well the company has heard and responded with SodaCaps. In short SodaCaps are very similar to (sorry to do this again) K-cups produced by Green Mountain Coffee (NASDAQ: GMCR). The difference is with SodaCaps you get all of the benefits of single serve drink making with patent protection that won't expire for quite a while.

With one SodaCap you can make 1 liter of soda or other drinks with “consistently flavored” ease. This seems to be the most important piece of the SodaStream puzzle if you are an investor. I've read other articles about how SodaStream seems like a great idea, but the process is messy. This was brought up by fellow fool Rick Munarriz where he liked the move SodaStream made to introduce the Revolution machine, but decried the messy issue of pouring the syrup into the bottle. Since the SodaCap fits onto the bottle and with one press it flavors the whole bottle it seems this messy issue can be put to rest.

While home soda making isn't as accepted as brewing your own coffee, that may be about to change. If nothing else, convenience wins out over time. This is the reason for the rise of single serve coffee. A key factor behind Green Mountain's success is, it's faster and less wasteful to make one K-cup than it is to brew a pot of coffee. Research firm William Blair recently pointed out that they expect to see SodaStream makers in Wal-Mart in “near to medium term". They also expect that grocery stores and drugstores will follow suit. If SodaStream prices these SodaCaps correctly, this allows customers to individualize their beverage in a way that even SodaStream's soda mixes can't do. Instead of lugging a 12-pack home from the store, taking home a small bottle of soda mix sounds good. However, if instead of a small bottle customers can bring home a package of SodaCaps, that's even better. With better distribution, SodaStream might overcome the stigma of making your own soda not being mainstream.

I know skeptics have a problem believing that SodaStream can challenge the big boys of the soda world. It seems like we've been here before. How many people believed that Green Mountain could take on old-fashioned coffee pots, and names like Folgers and Maxwell House? The difference was convenience and choice. Previously, most houses bought a big container of coffee and everyone had that one choice. Green Mountain offered coffee drinkers the option to choose multiple flavors and serve them up one at a time. While the original SodaStream soda makers were more of a chore to use, the new Fizz and Revolution machines are making the process more structured and simple. Add the better distribution, and the convenience of SodaCaps, and it sounds like SodaStream is about to bubble up even better profits than analysts expect.

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