Monday, 2 September 2013

Sodastream - Fizzing Up, Or Bubbling Over?

Establishing that the concept has been around for quite some time does not help answer the question that many investors have in mind about Sodastream: ‘Is this a fad, or could this be a disruptor of long established bottlers such as Coca Cola & Pepsi?’ A few retail investors-oriented research firms touting Sodastream stock seem inclined to believe that there is little in the way of an almost inevitable multi-year expansion.

Israeli-headquartered Sodastream International is a leading enterprise developing, manufacturing and selling home beverage carbonation systems worldwide. Its business model appeals very much to investors in that it resembles the razor/razor blades, which made the fortune of companies such as Gillette, whereby high-margin consumables are sold to repeat customers.

In Sodastream’s case, the carbonation system is sold in the USA at prices ranging from 69$-200$ depending on design and features, while refill CO2 canisters after first purchase can be swapped when emptied for new ones at around $15. The company’s turnover is further fuelled by the distribution of a great variety of syrups, many of them licensed by well-know brands, sold in bottles or mono-dose caps to dissolve in carbonated water.

The concept of a home made carbonated drink is know from a long time, as it originated with G. H. Gilbey, a gin distiller who came up with the first system in 1903. Although the first commercial systems were already marketed in the 1920s, the first home systems were sold only in the 1950s and became very popular in the 1970s and 1980s.