Israeli corporation SodaStream International Ltd. (NASDAQ: SODA), the word's biggest soda water company that sells machines which carbonate tap water at home, is on the "offensive" as its shares have risen by 340% since February last year.
To maintain their top dog position entailing $100 million in cash and virtually no debt, SodasStream is looking to further expand its M&A and stay ahead while it can, investing in collateral that could potentially secure the company in a time of need.
In the past 12 months, SodaStream has sold 3 million units which has significantly bolstered its customer base by "4% to 11.5 million households", Chief Executive Officer Daniel Birnbaum said in an interview. This has undoubtedly increased not only its international standing in terms of having a broader range of customers, but also in the eyes of its contemporaries and investors, who would now be more willing to inject a higher amount of faith and confidence in the business without worrying about any significant backlash.
"We're on the offensive now," Birnbaum said at SodaStream's headquarters in Airport City, Israel. "We can buy companies, we can advertise more aggressively. We're growing."
As a method to entice more American consumers, the carbonation giant is relying heavily on its environmental and ethical appeal to breed excess demand. Considering that carbonation machines have a lower degree of penetration, SodaStream may need to target this particular aspect as their next growth goal. This, coupled with the fact that about 1.25% of Americans have the machines in their home as compared to the 10% to 20% penetration patterns present the range of other nations that SodaStream operates in, implies that consumer behavior in the U.S. is atypical enough for it to require specific attention that is focused on altering deep-rooted habits.
Back in 2014, SodaStream primarily competed with Coca Cola Co. and PepsiCo Inc., and rather unsuccessfully, because it was swimming in a $260 billion market that had high barriers to entry. Yet, with the switch to carbonated water, SodaStream has carved out a nice little niche for itself that doesn't seem to be threatened by any major players as of yet. Keurig Green Mountain Inc. and Bevyz offered resistance in 2014 by partnering with Coca-Cola and Pepsi respectively, but that was a time when the home soda maker market had low household penetration and was still being prodded.
Given that SodaStream has become a well-established household name for this type of service, at this time no product can outdo its already-established reputation and brand loyalty. Therefore, it makes sense for it to adopt a growth strategy of trying to acquire other potential competitors because if they can't be against it and beat it, they would rather be with it.
SodaStream's CEO plans to concentrate its efforts in places like the U.S., Japan and Australia. SodaStream is experiencing sustained growth across Europe, "which accounts for about two-thirds of sales", he said. Growth in Europe has been slow in the past, but SodaStream has learnt to operate in a fashion that is specific to the country it is catering to. This entails not only adjusting costs, but also making changes to methods of advertising, companies with which to engage in partnerships and even product type to better be tailored to people's local habits and needs respectively.