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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • Hail Mary Super Bowl Ads – SodaStream (SODA) And Scarlett Johansson 6 comments
    Jan 27, 2014 4:22 PM | about stocks: SODA, BUD, KO, AAPL, KHC, DIS, PEP

    Hail Mary passes rarely work in Super Bowls.

    Sodastream International (NASDAQ:SODA) has been a short idea of ours since last June. Since, the price has begun to converge upon its value, but it still has a ways to go. Its most recent Hail Mary pass attempt is the hiring of Scarlett Johansson for an upcoming Super Bowl commercial. This year, Super Bowl ads cost up to $4.5 million for 30-seconds of air time. For Anheuser Busch (NYSE:BUD), Coca-Cola (NYSE:KO), or Apple (NASDAQ:AAPL), this is nothing. But for a sub-billion dollar market cap company such as SODA, this is a big bet.

    Super Bowl ads, like Hail Mary passes, usually don't work. According to a recent study of all of the over five hundred Super Bowl ads that ran between 2000 and 2009, most are not successful at driving sales. They often offer humor or entertainment, but they tend to fall down in their ability to advocate for their respective products. Companies such as Kraft (KRFT), Disney (NYSE:DIS), or PepsiCo (NYSE:PEP) may advertise during a Super Bowl as a tiny part of their overall budget and in the process connect their brand with a piece of Americana. But for each KRFT, DIS, or PEP, there is a Kforce, E-Stamp or in a last ditch effort at hyping a fad.

    So, why keep running them? The answer is that ads don't sell soda; they sell stocks. Announcing that a company is buying Super Bowl ad time boosts their shares temporarily around the time of the announcement. By the time the ad runs, it has already accomplished much of what it will accomplish.

    How can you capture the upside without paying the $150,000 per second cost? One solution is to produce the ad, stick it up on YouTube, and announce the ad to great fanfare but to get it banned before Fox sends you the bill. SODA almost succeeded by throwing in the line, "Sorry, Coke and Pepsi". However, Fox allowed them to run the ad after removing the offending line. Prior winners at the game of submitting an ad for media attention while getting banned naturally includes GoDaddy, Ashley Madison, and Mancrunch. They get to 1.) save over four bucks 2.) get people watching and discussing their ads and 3.) also get to play the part of a heroic and aggrieved victim standing up to the leviathan on behalf of the First Amendment, truth, justice, and the American way (which apparently mostly involves the internet and varying flavors of sex). Nothing gets clicks like "BANNED: TOO RISQUE FOR _____."

    Stocks: SODA, BUD, KO, AAPL, KHC, DIS, PEP
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Comments (5)
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  • Mongoose7916
    , contributor
    Comments (233) | Send Message
    Are you still short SODA Chris? Not sure about a person being short unless they think all of SODA's growth is done.
    27 Jan 2014, 04:29 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11422) | Send Message
    Author’s reply » The answer is somewhat complicated by how we enter and exit positions (typically via equity options). But or position reflects the fact that it has moved significantly closer to where we see its value.
    27 Jan 2014, 04:33 PM Reply Like
  • TimeOnTarget
    , contributor
    Comments (3655) | Send Message
    I hope we see a lot of Scarlett . . . . maybe just under the risque limit . . . .


    More and more it seems like TV ads have stock investors in mind rather than end use consumers. I guess I can see it occasionally, but it doesn't take much to make me suspicious -- "Why."
    27 Jan 2014, 07:24 PM Reply Like
  • Meatball Bob
    , contributor
    Comments (66) | Send Message
    Although we can question the value of these ads to the company's bottom line, the world is a better place for this commercial. It was one of my all-time favorites.

    29 Jan 2014, 10:16 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11422) | Send Message
    Author’s reply » Yep. I think 1.) funny and 2.) creative ad men but don't make it to 3.) I really should go out and buy a Nissan Maxima.


    I wonder what is the percentage of viewers who could identify the product associated with such ads an hour after they see it.
    29 Jan 2014, 10:20 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11422) | Send Message
    Author’s reply » SodaStream Reports Preliminary Third Quarter 2014 Results:


    SodaStream International Ltd. (NASDAQ: SODA), a leading manufacturer of home beverage carbonation systems, today announced preliminary results for the third quarter ended September 30, 2014.


    On a preliminary basis, based on the information currently available, for the quarter ended September 30, 2014, the Company expects:


    •Revenue to be approximately $125.0 million.
    •Operating income to be approximately $8.5 million.


    As the Company has not completed the quarter-end close of its third quarter 2014 financial statements, the revenue and operating income expectations presented in this press release are estimated and preliminary, and therefore, subject to quarter-end closing adjustments and may change.


    "We are very disappointed in our recent performance," said Daniel Birnbaum, Chief Executive Officer of SodaStream. "Our U.S. business underperformed due to lower than expected demand for our soda makers and flavors which was the primary driver of the overall shortfall in the third quarter. While we were successful over the last few years in establishing a solid base of repeat users in the U.S., we have not succeeded in attracting new consumers to our home carbonation system at the rate we believe should be achieved. The third quarter results are a clear indication that we must alter our course and improve our execution across the board. We have already begun a strategic shift of the SodaStream brand towards health & wellness, primarily in the U.S., where we believe this message will resonate more strongly with consumers. In addition, we are developing a comprehensive growth plan for the Company that will encompass Marketing, Product and Innovation, Distribution, Operations and Organization. We intend to share more specifics around our growth plan when we report third quarter results later this month."


    Mr. Birnbaum concluded, "We have a strong balance sheet and are well positioned with ample liquidity to invest in the areas of our business that we believe will fuel profitable growth in the years ahead. Despite our current challenges, we continue to be very confident in our business model and the global prospects for SodaStream. We firmly believe that our actions to shift the brand and improve execution will strengthen our leadership position in the home carbonation category and deliver enhanced shareholder value."


    The Company is scheduled to report actual third quarter 2014 results on October 29, 2014.
    7 Oct 2014, 10:29 AM Reply Like
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