It has been a little while now since investors have heard from SodaStream's (NASDAQ:SODA) management team, so the team at Capital Ladder Advisory Group has created this article to better inform investors on some quarterly developments. SodaStream is one of the most misunderstood companies and it remains a much maligned stock in the marketplace, in part because of the nature of its origins and Israeli incorporation. Many individuals, groups and even governments around the world have a staunch opposition to SodaStream because the company has a production facility in the occupied territory of the West Bank, Mishor Adumim. The BDS (boycott, divest, sanctions) movement has aimed to curtail the consumption of goods produced in these West Bank and surrounding occupied territories. SodaStream investors should continue to read developments regarding the BDS movement as protestors recently showed up at the newly opened SodaStream store in the UK and held peaceful protests outside the store.
Recently, SODA shareholders encountered a better than 10% drop in share price, leaving many investors in wonderment as to the reason for the sudden and impacting fall. Both retail and institutional investors were left scrambling for headlines and news regarding the 3 day sell-off. Having an advanced network of resources can prove beneficial when investing in an international company such as SodaStream. While such resources can almost never predict the movement of a company's stock price, they can at least provide insightful information pointing toward potential price movements. So why the sell-off in shares of SODA and why did it take so long to occur?
On September 19, 2012, Ireland's Joint Committee on Foreign Affairs and Trade set forth a proposal for a ban on illegal Israeli settlement goods. The proposal was sent to the deputy head of government, Eamonn Gilmore, who is also the minister of foreign affairs. This proposal didn't make headlines in the UK and Ireland until Friday September 21. Most SodaStream investors didn't uncover this developing story until more than a week later which sparked a subsequent sell-off in shares of SODA and a rise in daily volume of shares traded. What is most relevant about this proposed ban from the Irish Parliament is that such a proposal would prove illegal according to the EU/Israel Association Agreement. Within this agreement, it concludes that no single member party of the EU can ratify or change the existing agreement unilaterally. Ireland's proposed ban, which also urges greater enforcement of human rights for Palestinian citizens working in the occupied areas of the West Bank, infringes upon the EU/Israel Association Agreement. This proposal is really nothing new from Ireland as the country has attempted such a proposal in July of 2011. Essentially, the proposal does little more than create a call for the EU to seek greater actions with regards to global human rights issues as the practicality of the proposal would prove to be illegal and damaging to EU/Israel relations. While we have uncovered the legalities of this proposal, the prevailing sentiment should be considered as part of one's investment thesis in SODA and investors should also be aware that SodaStream International has production facilities in 13 countries around the world and one in Israel "proper", which is considered a legal Israeli territory. Additionally, even though a unilateral ban would prove to be illegal in practice, stranger things have happened over the last several years with regards to government policy
So now that we have cleared this hurdle, let's move forward with SodaStream quarterly developments. With Q3 having just recently ended for the company, investors are eagerly awaiting the firm's earnings announcement come November 5th (date not confirmed yet). Inside Q3, we are certain that SodaStream has continued its expansion efforts and new product launches.
The new Night Spirits line of Genesis machines and flavored syrups recently launched in the UK. Night Spirits will soon make their way to North America in the fourth quarter. These non-alcoholic spirit mixes have been eagerly anticipated by consumers and investors alike since they were announced in March of this year at the International Home and Housewares show.
SodaStream's patent pending SodaCaps launched in the third quarter as a test in Israeli retail locations and has been faring well in the early going. If you have not heard about SodaCaps before, read the outlined description available here. Management has indicated that SodaCaps will be available during the fourth quarter, but in limited locations in North America. During the third quarter, SodaStream also expanded its line of energy drinks in the U.S. to include a mango and cranberry flavored energy drink mix. In Germany, the company launched vitamin enhanced flavored syrups as well.
The SodaStream Source machine and Revolution machine have both launched at retail locations around the globe in the third quarter. If you're looking to upgrade your old soda maker for a new electric Revolution machine in the U.S., simply visit your local Williams-Sonoma (NYSE:WSM) store or go to williams-sonoma.com where the Revolution machine exclusively sells for $199.99. If you are looking to upgrade your old soda maker to the Yves Behar designed Source soda maker, the Source recently launched in the UK and in pockets around neighboring euro zone countries. SodaStream management has said that the Source machine will be available for purchase in the U.S. during the fourth quarter and capitalladders.com Market Research Analyst Martin Costa has recently discovered that Bed Bath & Beyond (NASDAQ:BBBY) will be carrying the Source machine which should be available in stores in the coming weeks. Bed Bath & Beyond will retail the Source machine for $129.99. What investors really want to know is how many Source machines did BBBY order to support the launch of the Source at over 1,000 store locations and for the highly anticipated holiday season? Our team of market researchers has uncovered the initial order for the Source machine and for greater details on the Source contact us at firstname.lastname@example.org.
Since striking a deal with Wal-Mart (NYSE:WMT) in the second quarter of 2012, SodaStream products continue to perform well at the mass market retailer. Capital Ladder Advisory Group has been tracking monthly sales of SodaStream and a host of other consumer goods at Wal-Mart since 2011. Based on 2,619 stores reported to Capital Ladder Advisory Group, during the month of September, Wal-Mart has sold an average of 1.8 Soda Jet kits per week/door (Wal-Mart sells SodaStream products in roughly 3,300 stores in North America).
For the average investor, if you wish to inquire about the strength of sales for a particular product at your local Wal-Mart store, it is not very difficult to do. Simply afford yourself the opportunity to speak with a department manager or the stores Customer Service Manager and they will usually discover the weekly sales produced from a specific product. From the perspective of the Wal-Mart manger, a specific product channel check or sales check has no bearing on total stores sales which would not be disseminated. Additionally, by informing a customer on the sales strength of any particular product, this might encourage the customer to buy the product. So don't be shy investors, challenge your local Wal-Mart managers (results may vary from store to store).
Ahead of the fourth quarter, and as a result of robust sales, Bed Bath & Beyond has made the strategic decision to direct greater inventories of SodaStream products to the store level. If you had visited the retailers e-commerce site last week you would have noticed that 80% of SodaStream products were out of stock at the time. BBBY continues to see robust sales from SodaStream products and made the decision to increase store level inventories and decrease e-commerce inventories in order to drive greater foot traffic at the store level which could lead to additional brick and mortar sales. As of 10/7/2012, the BBBY e-commerce site is accepting vendor direct orders of SodaStream products; these represent orders to be filled by SodaStream USA in Cherry Hill, New Jersey.
In the third quarter, SodaStream added the Home Shopping Network to its list of retail partners. In September, HSN featured a bundled Jet machine kit for $79.99. HSN sold out of this package on the day it aired live for viewers to purchase. SodaStream effectively sold roughly 22,000 Jet machine kits during this HSN feature event. SodaStream management is currently considering expanding this partnership with HSN in the fourth quarter to possibly include another HSN feature event that showcases a variety of soda makers.
SodaStream has also expanded its retail locations during the third quarter. In the UK, the company added Conran stores which began by offering the Source machine to customers this past September. Conran has 10 stores throughout the UK. SodaStream also expanded its existing retail partnership with Staples by adding over 100 Staples UK stores in the third quarter. In the U.S., SodaStream has welcomed 73 Bi-Mart retail locations into the distribution channel. Bi-Mart is an employee-owned chain of retailers located in the U.S. states of Oregon, Washington, and Idaho. The company describes itself as taking a deep discount approach to merchandising brand name goods, striving to offer a wide selection of top quality merchandise at low everyday prices. Like Costco, BJ's Wholesale and Sam's Club, Bi-Mart stores are membership stores. Additionally in the U.S., SodaStream added some 27 Lewis Drug store locations in the Midwestern states.
So there you have a look at some of the SodaStream developments during the third quarter. Look for my next SodaStream update before November earnings are released, which will be a detailed assessment of SodaStream operations and expectations.
Disclosure: I am long SODA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.