Sodastream shares crash – blame the ‘headwinds’
Pictures selected from the very many protests in the US and Europe against Sodastream’s occupation products.
March 30, 2014
SodaStream International Ltd. (SODA) , the Israeli maker of home soda machines, is posting its third straight quarterly rout in the stock market as sales growth falters.
The shares have tumbled 12 percent since the end of last year, leaving them down 40 percent over the longest streak of quarterly declines since the company’s 2010 debut on the Nasdaq stock market. The drop was the second-worst among the 23 stocks tracked in the Bloomberg Israel-US Equity index, which rose 5 percent in the quarter.
SodaStream’s sales will increase this year at less than half the 29 percent pace they did in 2013, according to the average of 10 analyst estimates compiled by Bloomberg. Chief Executive Officer Daniel Birnbaum said Feb. 26 that he expects “headwinds” to remain after poor holiday sales prompted the company to offer discounts. New rivals are also entering the business. Coca-Cola Co. is buying a stake in Keurig Green Mountain Inc. to help it market a home soda appliance.
Yonah Lloyd, SodaStream’s chief corporate development and communications officer, said the company plans to bolster sales by placing its products in new locations such as grocery stores this year. SodaStream has already corrected most of the issues that led to cost overruns and smaller margins in the fourth quarter, Birnbaum said on a Feb. 26 earnings call with analysts.
“Given the tiny size of the category at under 2 percent of homes, competition will help all players experience growth due to the greater awareness and interest,” Lloyd said in an e-mail March 27.
Shares of the Lod, Israel-based company plunged 26 percent on Jan. 13 after it reported preliminary earnings that missed analyst estimates. They’ve been rebounding on bets the entrance of larger rivals like Coca-Cola and PepsiCo Inc. (PEP) adds credibility to SodaStream’s product, Anton Brenner, an analyst at Roth Capital Partners who has a buy rating on SodaStream, said by phone from Newport Beach, California on March 26.
U.S. retail sales of home soda machines soared 30 percent last year, and sales of the accompanying products — CO2 carbonators, bottles, mixes and syrups — more than doubled, according to NPD Group Inc., a market researcher.
While Coca-Cola’s decision to purchase a 10 percent stake in Waterbury, Vermont-based Keurig Green Mountain spurred speculation rival Pepsi would partner with SodaStream to counter the threat, Pepsi has already invested in a company producing a rival machine, according to a March 10 report by Ali Dibadj, a New York-based analyst at Sanford C. Bernstein & Co.
Both Pepsi and Green Mountain own stakes in Sliema, Malta-based Bevyz, which introduced a rival at-home beverage maker in the U.S. last week. The company plans to sell its system in partnership with appliance maker Cuisinart, owned by East Windsor, New Jersey-based Conair Corp.
“We believe the landscape is about to get much more complex,” Dibadj wrote in the note. The Bevyz machine, which makes hot, cold, and carbonated drinks, “should be a forceful addition to the at-home beverage system market place.”
Jeff Dahncke, a spokesman for Purchase, New York-based Pepsi, confirmed the relationship with Bevyz while declining to comment further. Ariel Sterngold, vice-president of business development at Bevyz, declined to comment on the company’s plans with Pepsi.
“We are participating with multiple single-serve home-delivery product tests,” PepsiCo Chief Executive Officer Indra Nooyi said on a Feb. 13 conference call. “It’s too premature to commit without having a technology that actually works.”
SodaStream’s growth will be limited without a partnership with Coca-Cola or Pepsi, said Akshay Jagdale, a New York-based analyst at KeyBanc Capital Markets who downgraded SodaStream stock to hold from buy on Feb. 6, a day after Coca-Cola announced its deal with Green Mountain.
“Investors want to own a stock that’s going to continue to be the leader in the category,” Jagdale said in a March 27 telephone interview. “If you don’t have Coke and Pepsi, the most beloved brands in the beverage space, it’s going to be hard for SodaStream, or whoever doesn’t have those brands, to really drive system adoption.”