I Drank From the SodaStream, and It Was Good

It always seems to happen this way. I finally go out and buy a SodaStream International (NAS: SODA) machine, and the company announces the "new hotness" will be coming out this year. Sigh.

The new Revolution system will further cement SodaStream's home soda system as the must have small appliance for every kitchen, at least in my humble opinion. The product continues to become an even healthier alternative to name-brand soda, introducing a line of flavors using all-natural stevia as a sweetener, helping them check in around a mere 5 calories per serving. Combine that with the addition of Kraft Foods' (NYS: KFT) Country Time and Crystal Light flavors about the same time, and you have a product that can meet the sweet-drink needs of many types of people. The Kraft deal isn't necessarily a game changer, but it brings some valuable brand strength to the equation to help build a bit of a moat around the company.

Look out, Big Soda?
SodaStream's home system is still relatively new to the mainstream, if it is even there yet, but I don't think "Big Soda" is quaking in its bottles yet. Coca-Cola (NYS: KO) is still the undisputed leader in selling flavored sugar water, with Coke and Diet Coke commanding more than 25% of the soda market share, and four products in the top 10. PepsiCo (NYS: PEP) remains a favorite as well, also checking in with four top-10 brands. My personal favorite, at least until replaced by SodaStream's own Dr. Pete, is Dr Pepper Snapple's (NYS: DPS) Dr Pepper, with both the regular and diet versions making an appearance in the top 10 soda brands. The company is a distant third to the Coke-Pepsi duopoly, though.

There is still something to be said about the convenience of simply buying your sweet drinks already mixed and in a convenient, ready-to-go container. Decades after we started brewing our own coffee at home, millions still flock to the local Starbucks for their morning caffeine fix. It will definitely take a change in behavior from the often fickle American consumer for SodaStream to be fully embraced in the U.S., but I feel that even a 5% conversion rate for the product would equal sizable returns for the company and its investors.

The model seems to be working
The old "razor and blade" model is very apropos when it comes to SodaStream. It continues to improve the "razor" by offering new products that continually make it easier to use, while simultaneously changing the variety of "blades" available, which are the products that folks will hopefully continue to buy. Increases in unit sales of flavors and carbonators bear this out, but investors were slightly spooked when sales in systems went up only 8%.

Soda for everyone!
SodaStream seems poised to maintain its Rule Breaker status, with only minor competitors in the home-carbonation game. Its systems are found in the small-appliance section of major retailers across the country, and its wide variety of flavors provides options for even the pickiest consumer. To keep an eye on what is going on with this exciting company, feel free to add SodaStream International to My Watchlist, a free service from The Motley Fool to bring you all the news and analysis about the companies you care about most. Get started by using the following links.

At the time this article was published Fool contributor Robert Eberhard owns a shiny new SodaStream machine but holds no position in any company mentioned. Follow himon Twitter, or check out his holdings and a short bio. The Motley Fool owns shares of PepsiCo, Starbucks, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of SodaStream International, PepsiCo, Coca-Cola, and Starbucks, creating a diagonal call position in PepsiCo, and writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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