SodaStream Plans to Enter U.S. Grocery, Drug Stores in 2014

SodaStream International Ltd. plans to bring its do-it-yourself soda machines to U.S. drugstores and supermarkets in 2014 as the Israeli company looks to expand sales and household usage in the world’s No. 1 beverage market.

“We will do it in 2014,” Chief Executive Officer Daniel Birnbaum said in a phone interview yesterday. “We will test a bit next year but it’s too early. There is a temptation to do it now but we have to make sure that when we enter retailers we provide enough velocity to justify the shelf space.”

A move into grocery and drug stores had been anticipated by analysts including William Blair’s Jon Andersen, yet the company hadn’t provided a timetable. It follows SodaStream’s entry into Wal-Mart Stores Inc. in May, where its devices sold out in some of the 2,900 stores carrying them, according to a June 20 report from analysts at Monness Crespi Hardt & Co.

SodaStream, of Airport City, Israel, gathers 29 percent of its revenue from the U.S., where consumers purchased $142 billion in non-alcoholic drinks in 2010, according to Beverage Information Group. The U.S. has the second-highest per capita consumption of carbonated beverages in the world, behind Mexico, according to data trackers Euromonitor International.

SodaStream fell 2.4 percent to $37.35 at 11:01 a.m. in New York. The shares have risen 14 percent so far this year.

Reusable Bottles

The products were available in more than 13,000 U.S. locations in the second quarter, including outlets of Wal-Mart, Target Corp., Staples Inc. and Bed Bath & Beyond Inc. as well as department stores owned by J.C. Penney Co. and Macy’s Inc. Moving into drug stores and supermarkets would boost sales, particularly of the company’s rechargeable carbon-dioxide canisters, and the added visibility in those outlets could increase the adoption of its devices, Oppenheimer & Co. analyst Joseph Altobello said in an e-mail.

SodaStream’s soda-making system, which employs reusable bottles, CO2 cylinders, tap water and a range of 128 flavor syrups, is sold in more than 40 countries. In some European countries, like Sweden, the devices are currently sold in food and drug chains. The company gets 52 percent of its sales from Europe.

Separately, Birnbaum said he would bring SodaStream to Greece and India next year. In Greece, “we’re not intimidated by the economy because we enable consumers to save money,” he said in the interview. Greek economic sentiment worsened in May as the country’s downturn extended into its fifth year. In India, SodaStream is looking for a partner and might enter the market through a joint venture, he said.

Increasing Capacity

To help meet the demands of new markets and sales channels, SodaStream has invested about $50 million on a new 85,000 square-meter (900,000 square-foot) factory south of Tel Aviv that will triple the company’s production capacity when it is completed by 2014, Birnbaum said. In May, SodaStream raised its forecast for full-year sales growth from 28 percent to 33 percent, or about $384 million.

Birnbaum, a New York native who joined SodaStream in 2007 after running the Israeli operations of Nike Inc., also said he’s in talks to embed SodaStream’s technology into refrigerators, describing the negotiations with a partner he declined to name as “far along but not imminent.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE