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There is a rapidly increasing player in the soda industry, and it is coming faster than you think. SodaStream (NASDAQ:SODA) has made a splash in the U.S. in the past few years, and the company's expansion efforts are only getting bigger. On Tuesday, it was reported that the next leg of the company's expansion will come over the next two years, a move bulls have been waiting for. Let's look at the company and see why this news is the next logical step for this company.

The Announcement:

In a phone interview on Monday, SodaStream CEO Daniel Birnbaum stated that the company will get its products in U.S. grocery and drug stores in 2014. This has been an expected move by many who follow the name, including myself, although the timeline was the question. Now we have the answer. SodaStream will run some test markets in 2013, but a full rollout will be in 2014. To me, that looks like the perfect timetable for the company.

The Phases of Growth:

The move into grocery stores is just the next step of expansion, something SodaStream has been concentrating on for years. Here's the current timeline of what they already have done, and where they expect to go from here.

  • 2011: Greatly expanded their U.S. retail presence, going from about 4,000 locations to around 10,000. By that time, SodaStream had entered plenty of new doors, and products were available in locations such as Staples (NASDAQ:SPLS), Target (NYSE:TGT), Bed Bath and Beyond (NASDAQ:BBBY), Kohl's (NYSE:KSS), Best Buy (NYSE:BBY), Sears (NASDAQ:SHLD), JC Penney (NYSE:JCP), and Costco (NASDAQ:COST). Those are just a few.
  • 2012, Part 1: SodaStream announces partnership with Kraft (KFT) to start year. SodaStream announces new deal to get its products into Wal-Mart (NYSE:WMT) after a great first quarter report.
  • 2012, Part 2: The launch of the Revolution, the next generation of soda maker. This will occur later this year, but the company expects the machine to be out for the holiday season.
  • 2013: SodaStream will enter new markets such as Greece and India, as well as test market products in US grocery/drug stores.
  • 2014: Full adoption into U.S. grocery/drug stores. A new factory south of Tel Aviv will be completed as well, costing $50 million, but tripling production capacity.

The Next Logical Step:

SodaStream is expanding greatly, and it is time for the big boys like Coca-Cola (NYSE:KO) and Pepsi (NYSE:PEP) to take notice. Recently, the company heated up the soda wars when it laughed at a cease and desist order from Coke in regards to a South African marketing campaign. Coke was not happy with a marketing project called "The Cage", a large metal cage that holds thousands of empty bottles and cans. SodaStream has placed several exhibits of "The Cage" around the world, in an effort to show how their products save the world from all the bottles and cans that would normally be thrown out. In fact, if you go to SodaStream's website, a counter at the top says "Saving the World From," and is right now almost up to 1.8 billion bottles. That's quite a lot when you really think about it.

In the second quarter, SodaStream's products were available in about 13,000 locations in the U.S. That's more than triple the number at the start of 2011. That number will only increase as they further enter Wal-Mart, as well as increase some of their door counts in other major retailers. The Wal-Mart move was key, which will really help them launch the Revolution machine later this year.

SodaStream is hoping to establish enough of a customer base this year and next in the US to set up the move into grocery stores fully in 2014. It is quite possible that SodaStream could get up to 20,000, maybe 25,000, or even more, locations by the end of 2014, which would really give them a leg to stand on in the United States.

Far Behind, But Gaining:

The following table shows the 2011 revenues for SodaStream compared to the big boys, with the expected 2012 and 2013 numbers.

2011 Revenues $288.95M $46.55B $65.88B
2012 Revenues $383.63M $48.44B $67.22B
2013 Revenues $453.51M $50.92B $70.18B

As you can see, SodaStream is very far behind in this race, but it is growing much faster than its competitors. SodaStream is tapping into an extremely large market (the U.S.), where an estimated $142 billion was spent in 2011 on non-alcoholic beverages. Remember, for the numbers above, that Coca-Cola is primarily a beverage company, while Pepsi has other businesses like foods and snacks.

SodaStream has a long way to go. But it is already in 40 different countries, mostly in Europe, which accounts for about half of the company's sales. With about 128 different flavor syrups, the company does offer a wide selection and can accommodate different tastes.

SodaStream has been known for beating analyst estimates handily, so I wouldn't be surprised if they hit the $400 million revenue number this year, which would probably set them up to hit $500 million next year. We probably are a few years away from a $1 billion revenue year, but it is not out of the question for the company to double its revenues between 2011 and 2015, maybe even by 2014. It all depends on how many locations they enter in the next couple of years.

Conclusion/Stock History:

The move into grocery and drug stores in the U.S. is a logical one, and there are some countries in Europe where SodaStream already has products placed. The company has done a tremendous job of growing itself over the past few years, and is continuing to expand in the U.S. and internationally. Between 2012 and 2014, SodaStream could double its U.S. retail presence, after nearly tripling the door count in 2011.

As for the stock, SodaStream shares have risen towards the upper end of the range in the last couple of weeks. As I finish this article, they are currently trading at $37. This name has always been a favorite of short sellers, who call the company's products a fad. As of the end of May, about 10.4 million shares were short, equaling half the number of shares outstanding and more than two-thirds of the float. I wouldn't be surprised to see another run down towards $30, and that would present your buying opportunity. The news today for SodaStream was extremely positive, and is a logical step for an ever growing company.

(Click to enlarge)

Source: Yahoo Finance

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.