If you were a 1970s or 1980s kid, having a SodaStream at home gave you instant street cred. Making your own cooldrinks in your kitchen. From tap water and flavoured syrup. That was the epitome of cool.
Later, when Coca-Cola and Pepsi became dominant, persuading drinkers that they could make better versions of these readily available (and cheaper) alternatives became a tough sell for SodaStream. The product was relegated to niche status. Like instant mashed potato, margarine and condensed milk in a tube.
This week PepsiCo, the global consumer brand company that makes Doritos, bought SodaStream for $3.2bn.
Very simply, beverage and food companies are broadening their offerings beyond salty potato chips and cooldrinks by introducing healthier alternatives. PepsiCo has added hummus, oats and water to its stable.
Rival Coca-Cola now sells milk, coconut water and tea. More recently, it bought a stake in sports-drink Bodyarmor, whose backers include former basketball star Kobe Bryant.
These days, Israel-based SodaStream promotes itself more as a tool for making carbonated water — or seltzer, if we’re going to be posh about it — than as an at-home fizzy-drinks maker.
You will know that, globally, soda consumption has dropped. And in the US sparkling water sales have actually grown more quickly than the overall bottled water category.
PepsiCo has made its own efforts in the sparkling water category, launching Bubly earlier this year to try take on LaCroix, the sugar-free, flavoured sparkling water that’s inspired zealotry among millennials.
PepsiCo is also betting on SodaStream’s razors-and-blades kind of business model. Remember that it sells the machines, reusable bottles, gas canisters and flavourings.
Numbers-wise, the deal will work like so: PepsiCo will pay $144 a share (in cash) for SodaStream’s outstanding stock. This represents a 10.9% premium to last Friday’s closing price of SodaStream’s US-listed stock and a 32% premium over SodaStream’s average weighted share price over the past 30 days.
Goldman Sachs and Centerview advised PepsiCo, and SodaStream was advised by Perella Weinberg Partners.
Turning water into cola
Analysts say the deal will give PepsiCo better reach into markets such as Germany and Japan, where SodaStream is … big (sorry, I couldn’t resist). SodaStream distributes in 80,000 individual retail stores across 45 countries, by the way.
The deal, PepsiCo’s largest in eight years, is likely to be the last for CEO Indra Nooyi. She is due to step back in October, leaving her successor, Ramon Laguarta, to make this transaction pay off.
It’s funny, though, that PepsiCo and SodaStream have ended up as bedfellows. Over the years, SodaStream hasn’t wasted an opportunity to blast bottled-water makers for polluting the environment.
"Shame on PepsiCo," said SodaStream boss Daniel Birnbaum last year, after PepsiCo’s Super Bowl ad for its new bottled water, LifeWTR. "I’ll say it till I’m blue in the face: the bottled-water industry is the biggest marketing scam of all time. Like about half of the bottled water in America, including Coca-Cola’s Smartwater and Dasani, PepsiCo’s new water brand comes mostly from the same municipal water sources as tap water. The truth is that consumers can get water without the bottle and for a fraction of the price."
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