The CEO of SodaStream says he is confident that the next generation of home beverage-making systems will not deal a killer blow to SodaStream.
Asked by an analyst on the Israeli firm’s first quarter earnings call why SodaStream is a good platform for large beverage brands given that it “doesn’t allow for exact dosing of carbonation and flavors”, CEO Daniel Birnbaum said: “The argument that the consumer wants exact dosing is a reflection of the trap that those beverage companies are in, in my opinion.”
He added: “The consumer does not want exact dosing, the consumer wants to be trusted and empowered to make their beverage the way they want, with the amount of bubbles they want, and the amount of flavor they want, the amount of sweetness and the choice of the sweetener that they want. And that’s where there is a complete divergence between the way SodaStream thinks and the way the category behaves.
“Let them give their exact dosing and the right amount of sugar and aspartame. In the meantime we are going to let you make your soda exactly the way you want.”
‘Consumers want to be trusted and empowered to make their beverage the way they want’
Meanwhile, the health angle is a key growth driver for the SodaStream brand and would be played up more in future marketing campaigns, he said. “We are on trend… When you look at what’s going on in the carbonated beverage industry with the big players who are losing share in the United States.... And here we are growing.”
While first quarter sales in the key North American market had been disappointing, the drop was blamed on elevated inventory levels of SodaStream machines and flavors at retail customers due to weak holiday sales last quarter, he said.
However, sales of gas refill units were up strongly, while a recent consumer survey showed that 77% of consumers who use a SodaStream are using it at least 3-4 times a week, with 55% of those using it at least once a day, he said.
Coffee and soft drinks from the same machine? ‘We just don’t believe that that’s where the market is going right now’
Asked whether consumers wanted machines that did everything, Scott Guthrie, regional general manager of the Americas, said: "We just don’t believe that that’s where the market is going right now.
“You know there are some industries that just don't combine, you still don’t have the TV and the DVD combined even though you think you would have expected 15, 20 years ago that that would have happened. So it's not intuitive, it's not necessarily going to happen.”
He added: “We want to focus our innovation not on the idea of combining equipment or delivering a beverage in a glass, we want to focus our innovation on delivering a product that is on-trend to health and wellness that’s what we believe the consumer really wants.
“The consumer doesn’t want sugar and water anymore, they want a better beverage and that’s where we are focusing our efforts… no high fructose corn syrup, no aspartame… a better for you solution with less calories.”
Marketing efforts would target different messages to different user groups, he said.
“We mean different things to different consumers, to one we’re a convenience story, to another we’re a value, another we are environmental, another we are health and wellness and some love the taste.”
While the SodaStream brand now has a presence in 17,000 stores in the US, there is a “significant opportunity to expand our presence across new channels and doors including grocery and drug”, he said.
Full-year revenues expected to be around $563m
Q1 revenues rose 0.5% to $118.2m with a 28% drop in the Americas offset by a 17% increase in sales in Western Europe, a 28% rise in sales in Asia/Pacific and a 34% rise in sales in Central and Eastern Europe, Middle East and Africa.
SodaStream expects full year 2014 revenues to rise 15% to $563m, a little below analysts' expectations, and net income to rise 3% to $42m, in line with expectations.
SodaStream is the world's largest manufacturer, distributor and marketer of home carbonation systems with a presence in 45 countries.