AIRPORT CITY, ISRAEL — A year ago, executives with Sodastream International Ltd. unveiled a growth plan centered on the repositioning of the company’s products and brands toward health and wellness, as well as a number of operational changes aimed at improving efficiencies and overall financial performance. Today, that strategy is moving forward according to the plan and the company is beginning to reap the rewards, said Daniel Birnbaum, chief executive officer.
On Nov. 3, Sodastream partnered with the American Diabetes Association to encourage healthy beverage choices, making Sodastream the first national beverage company to partner with the A.D.A., Mr. Birnbaum said.
|Daniel Birnbaum, c.e.o. of Sodastream
“It’s a great fit as consumers around the globe are seeking out better-for-you alternatives to sugary beverages, this is exactly what our new line of flavors offers,” he said. “Launched in the U.S. and select other countries during Q3, our new flavors come in a sleek new bottle designed by Yves Behar and … come in five categories. Fruits, Zeros, Essence and Plus — meaning plus minerals, vitamins and fibers —, and our Gourmet line, which is a collection of unique flavors such as cucumber apple, lime basil and black currant lime, which is now our front runner among the gourmet flavors.”
Along with the new flavors and new packaging came a higher price point than earlier products. Asked whether the company had seen any pushback from existing Sodastream customers, Mr. Birnbaum explained: “What’s driving the higher price per finished liter is the fact that we’ve reformulated the flavors and put in better ingredients. For example, we take out all the Waters flavors, which don’t have aspartame or Splenda or any of the artificial sweeteners with few exceptions, and we’ve used much more expensive ingredients such as Stevia and erythritol, which are natural. And what happened is, as a result, these flavors are more expensive to manufacture.
“Our gross margin actually declined from somewhere around mid-50%s down to mid-40%s or even low 40%s in the new flavors, and that’s why we decided to price them where we priced them. We also made a decision from line price, the classics, or the fountain style and together with our Waters flavors and that’s what’s driving this higher price per liter.
“Are we getting pushback? We’re getting some pushback. But keep in mind that in many of our markets, the penetration level is so early. So we’re getting pushback from a few consumers who are buying the syrup, and remember 70% of our volume is simply sparkling water and without the flavors. So yes, there are a few people that are pushing back and remember the old price. On some occasions, we need to explain what’s driving this — mainly better ingredients, healthier more natural syrups. But by and large, most of the market has not yet become aware or haven’t used our brands and they’re not used to the old price point. So we have tremendous opportunity ahead of us and we didn’t want to price these syrups any lower than they are right now because we have would have eroded our profitability entirely.”Net income at Sodastream in the third quarter ended Sept. 30 was $2,242,000, equal to 11c per share on the common stock, down 76% from $9,464,000, or 45c per share, in the same period a year ago. Revenues fell 13% to $110,015,000 from $125,905,000.