Here's a new purchase that intrigues me: SodaStream (SODA).First, SODA has a high percentage of 4- and 5-star reviews on Amazon (AMZN), which you always like to see.Second, SODA has room to run, based on the potential savings soda consumers pocket by switching to home-carbonation. Here's my thinking:World-wide, Coca-Cola (KO) serves 1.7 billion units per day (2011 annual report), or 620 billion servings a year (1.7 times 365).Also, KO has 43% of the U.S. market (http://read.bi/14RmPtX). For our purposes, we'll assume this is also KO's global market share. So, about 1.443 trillion cola servings are consumed worldwide every year (620 billion/0.43).Let's also assume that the consumer's per-unit cost is $0.54. To get this number, I divide the $12.99 price for a case of Diet Coke at Office Depot) by 24 (http://bit.ly/Y0KPDp)Meanwhile, SODA claims the per-unit cost for a home-carbonated beverage is $0.25. http://bit.ly/14RmPtYThus, home carbonation savings is $0.29 per-unit ($0.54 minus $0.25). With 1.443 trillion cola servings consumed worldwide a year, the world's consumers of fizzy drinks save $420 billion a year switching to SODA's and other do-it-yourself methods. (1.443 trillion x $0.29).Last, let's estimate the cost savings-market value ratio. Divide that $420 billion of annual cost savings by SODA's $1 billion market value and you get 420x, meaning the annual costs savings is 420 times SODA's market value. By this measure, SODA appears to have a long runway of growth. hewitt
From a consumer standpoint, most people have brand loyalty. For instance, I'm a diet Mt. Dew drinker. I looked and they do have a substitute, but based on reviews, no one said it tasted anything like the real thing, not even close. That would give me pause from purchasing it. I'd assume loyal drinkers of Coke and Pepsi would feel the same. This will limit their market expansion until the cost differential becomes large enough that people will tolerate the taste difference.For me, I'd explore putting in a refurbished soda fountain and buying the real thing first. I've seen site dedicated to doing this.
Thanks akck. Good point about brand loyalty. With beer, I like drinking a Molson Golden after spending 3 hours on my bicycle, and I don't have any interest in switching--in part, I admit, because of the emotional attachment developed at a younger (and almost legal) age. With red wine, in contrast, I want to experiment by vineyard and varietal. So, no brand loyalty.As for soda, with half the world living on $2.50 a day or less, home carbonation offers a compelling value to 3 billion consumers.http://www.globalissues.org/article/26/poverty-facts-and-sta...Also, look at the rapid adoption rate of the Monster drinks, Red Bull, Full Throttle, Amp, etc. So while you and I are brand loyal, a lot of other consumers are open to new flavors.Last, as we both know, soda is really bad for us...especially the sugar and caramel. (Sugar "feeds" cancer, according to some studies.) SodaStream, though, claims their ingredients are healthier than the name-brand versions. If true, this is a second way in which SODA differentiates itself from the incumbents.
Anyone considering investing in SodaStream should read some of the product reviews over on Amazon. For example:http://www.amazon.com/review/R2LD10TAEEJ5O7Especially the comments, which include responses from SodaStream reps.
Thanks for the links. Those comments are from 2009, so SODA may have fixed this problem. If SODA becomes more than a starter position, I will buy the gadget and check the ease of use, to see if the 2009 comments are still relevant.hewitt
Good points all. My brother in law is a rabid soda drinker even though he knows it's bad for him and he bought one of these a couple of years ago and still uses it. The main constraint that he used to complain about was that he could only buy them at bed bath and beyond... and while I haven't looked at the numbers lately I suspect they are still the major supplier (in fact I have seen some people argue that they should just buy out SODA). But now I have seen the machine in Wal*Mart and other places so I'm not as concerned about that issue. Regarding brand loyalty, nobody does marketing as well as Coke but even their own recent behavior such as the 2 minute commercial suggests that all of the new evidence coming out about just how big a contributor soda has been to obesity in our country and Bloomberg's attacks are actually working. You see them using the same type of arguments that big tobacco used: multiple causes of the problem, no randomized trials, etc. As you said, Hewitt, I think that the desire for lower calorie beverages is growing rapidly, and have seen many of my female friends switching to Polar carbonated beverages...the ability to control the amount of sugar with the sodastream machine is a big advantage. I've liked the numbers on SODA enough to add it to caps ages ago but never was fully convinced enough that it wasn't a fad to put real money into it. But seeing you mention it makes me want to give it a closer look.
FYI -- My weekly eTables email notice from IBD had SODA as one of the two featured stocks:SodaStream (SODA) broke out past the 52.77 ideal buy point in a base pattern April 11. Volume was about 69% above average on that move, which is above the 40% minimum you like to see on a breakout. The Israel-based company sells soda makers that let you create your own carbonated beverages at home. Sales growth ranged from 49% to 55% the past four quarters. Earnings growth has also been strong, but somewhat inconsistent. EPS gains are down from prior triple-digit increases, but still above the 25% minimum you look for. The company is scheduled to report its latest numbers May 6.
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