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SodaStream Pops

Quinn Foley profile picture
Quinn Foley


  • Q4 capped off an excellent year for SODA.
  • Sales of sparkling water makers accelerated to their highest rate of growth in four years.
  • Despite the shift in sales mix from higher-margin consumables to soda machines, margins improved significantly.
  • The decision to consolidate manufacturing and logistics activities into a single facility has materially improved the margin profile.

SodaStream International (NASDAQ:SODA) is the world's largest and best-known maker of home beverage carbonation systems, with an estimated user base of 12.5 million households. The SodaStream device carbonates water by adding CO2 from a pressurized cylinder to create sparkling water in seconds. The company also sells more than 100 types of concentrated syrups and flavorings to make carbonated drinks.

SODA went public on the Nasdaq in November 2010 and has a strong track record of growth and margin expansion (Figure 1). The company uses a "razor/razor blade" business model, which is designed to increase sales of sparkling water systems (the razor) and to generate recurring sales of higher-margin consumables, consisting of CO2 refills, flavors, and carbonation bottles (collectively, the razor blades). The beauty of this strategy is that increased sales of sparkling water systems result in subsequent increases in gross margin associated with higher sales of consumables.

Figure 1: Key Operating Metrics

Source: Madison Investment Research

Historically, the growth in revenues was driven by a heightened focus on promoting sparkling water makers, particularly in North America (the world's largest market for carbonated beverages) and Western Europe. As the installed base of sparkling water makers increased in these markets, it resulted in even stronger growth in consumables revenues over time (Figure 1). In more recent times, an increasing portion of the growth has come from sales in less mature markets in the Asia Pacific, Central & Eastern Europe, the Middle East, and Africa.

Strength Continues

SODA reported its results for Q4 and FY17 a couple of weeks ago and the results were better than expected. Sales of sparkling water makers increased 26% for the quarter, consumables sales grew 14%, and EBITDA was up 24%. Western Europe was particularly strong, accounting for more than half the revenue increase, which indicates that there's still a long runway for growth in

This article was written by

Quinn Foley profile picture
equity analyst / macro. passed cfa level ii exam

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