AIRPORT CITY, ISRAEL – Four strategies shape SodaStream International’s plans to revive its business in the United States, where sales declined 28% during the company’s first quarter.
“While I see many positives in the business, it’s clear that our rapid growth from zero to $200 million outpaced the development of our infrastructure,” said Scott Guthrie, general manager of the Americas region, during a May 14 call with financial analysts to discuss first-quarter earnings. “Many of the much-needed changes are currently under way while others will take time to implement and yield positive results.”
First, the company is focused on sharpening its marketing efforts to convert brand awareness into purchases. SodaStream users are passionate about the product, Mr. Guthrie said, with 77% using the machines at least three or four times a week and 55% using SodaStream products daily, according to a recent survey.
“At the same time, unaided brand awareness grew at a double-digit pace year over year to 40% with aided awareness very high at 84%,” Mr. Guthrie said. “That said, I believe there is tremendous opportunity to sharpen our positioning in consumer messaging to convert that high awareness into purchases, which will ensure our continued leadership of the burgeoning home carbonation category.”
SodaStream’s second priority involves expanding its retail presence into new channels, including grocery and drug stores, and optimizing its current distribution. These efforts include a new display in Wal-Mart stores beginning this month.
Portfolio management represents the third prong of the company’s plan to improve its U.S. business. SodaStream continues to announce brand partnerships with such recent additions as Ocean Spray, Crystal Light, Kool-Aid and V8 Splash.
“I'm also excited about the product pipeline, which features innovative new soda makers and flavors, including single-serve delivery options and new partnership agreements with Welch’s, Sunny D, Skinnygirl and many more,” Mr. Guthrie said. “That said, all this exciting product innovation means we need to better manage the portfolio as I believe s.k.u. rationalization would benefit the user experience and reduce cost and complexity from our supply chains.”
Fourth, the company is leveraging its gas refill exchange accessibility by strengthening collaborations with other brands, such as Samsung and KitchenAid, that utilize SodaStream’s carbonators.
“Gas refills are the lifeblood of the SodaStream system and continue to grow,” Mr. Guthrie said. “Our exchange program is a well-oiled reverse logistics system that drives valuable consumer traffic to our retail partners and represents a very strong barrier to entry to our competitors.”
While sales dropped in the U.S. during the quarter, international markets experienced strong growth.
“I visited several international markets where SodaStream has achieved significant household penetration and broad consumer acceptance,” Mr. Guthrie said. “I am confident that we can take the blueprint for success and replicate it in the U.S.”
For the first quarter ended March 31, SodaStream earned $1,778,000, equal to 9c per share on the common stock, down 85% from $12,084,000, or 58c per share, in the prior year period.
Revenue totaled $118,172,000, up slightly from $117,639,000, reflecting a 28% decline in sales in the Americas that was offset by gains in international markets. During the quarter, the company sold fewer soda maker starter kits but more carbonation refills and flavor concentrates.For the fiscal year, SodaStream expects revenue growth of approximately 15% and a 3% increase in full-year income.