AIRPORT CITY, ISRAEL — Just as Keurig Green Mountain has strategically expanded beyond coffee, SodaStream International is broadening its beverage capabilities to include more than soft drinks. The maker of home beverage systems said it is working on a machine that produces single-serve and multi-serve cold sparkling, flavored and hot beverages, including coffee.
“This Wi-Fi-enabled Internet-of-things device will produce any beverage you can think of at a touch of a screen, providing great value, a responsible environmental footprint, an empowering consumer experience, as the consumer will control carbonation level, flavor intensity and temperature, all with a beautiful design representing kitchen jewelry,” said Daniel Birnbaum, chief executive officer, during a Feb. 25 earnings call with financial analysts. “We will not provide a launch date, but we will present a working model to selected customers next week at the International Housewares Exhibition in Chicago.”
The innovation represents a clear move away from soda, as the company urgently reinvents itself amid tumbling sales, particularly in the United States. For the year ended Dec. 31, 2014, Sodastream had net income of $27,944,000, equal to $1.33 per share on the common stock, down 34% from $42,027,000, or $2.02 per share, the year before. Revenue fell to $511,774,000, down 9.1% from $562,723,000 for fiscal 2013.
Net income for the fourth quarter was $12,295,000, equal to 59c per share, which compared with a net loss of $15,649,000 for the comparable quarter. The company reported total revenue for the quarter of $126,526,000, down 25% from $168,110,000 for the fourth quarter of fiscal 2013.
During the quarter, Sodastream recorded non-cash, pre-tax charges of $15,649,000 as part of restructuring and a growth plan announced in October.
Sales of beverage makers declined 32% for the quarter, driven by softer consumer demand and reduced promotional activity.
“Q4 was particularly challenging for us in the U.S., where revenue was down 55% to $30 million, which represents 24% of our global business,” Mr. Birnbaum said. “On a sell-in basis, U.S. sparkling water maker units declined 72%, to $192,000, flavor units declined 64%, to $1.5 million, and gas refills were down 3%, to $1.1 million.”
SodaStream’s growth plan hinges on consumer acceptance of the company’s new positioning as a health-oriented brand. The company is reintroducing itself as a leading sparkling water company, not a soft drink company.
“In support of our new positioning, we’re launching an entirely new portfolio of great tasting, better-for-you sparkling water flavors, branded Waters, made with natural ingredients and no artificial sweeteners,” Mr. Birnbaum said.
Four new product lines under the Waters brand include Fruits, which feature fruit flavors with no preservatives; Zeros, which has no calories; Essence, which contains a hint of taste with low calories; and Water Plus, which includes vitamins, fiber, protein and minerals.
The company also has partnered with a top-rated chef to announce a line of gourmet sparkling water flavors.
“These exceptionally tasting flavors fit perfectly with our healthier strategy, and they offer foodies a unique and compelling experience and a reason to join the SodaStream revolution,” Mr. Birnbaum said. “These 12 gourmet flavors are clustered in three groups, Flowers, Herbs, and Fruits, and they include my personal favorites: lime basil and green apple cucumber.”
The new products are expected to roll out starting in July.
“We’ve also made headway on our strategy of reformulating and rebranding our classic flavors, such as cola, orange, lemon lime, and root beer, under a new sub brand called Fountain Style.”
The company also is extending a limited test with Pepsi into the beginning of the year.
As part of the growth plan, the company recently reshuffled its leadership team. Shmuel Peretz has joined SodaStream as chief operating officer, replacing Yossi Azarzar, who announced his retirement following eight years with the company. Yoram Evan, chief commercial officer, and Scott Guthrie, general manager of the Americas, have left the company to pursue other opportunities. Mr. Evan’s responsibilities have been divided among the senior management team, and Eyal Shohat, chief legal officer, was recently named to the additional post of chief corporate development officer. Mr. Birnbaum is overseeing the U.S. market while the company recruits a new manager. The company also is seeking a chief marketing officer for the group.
“Obviously, our business was in a state of flux, as we implement the new growth plan,” Mr. Birnbaum said. “It will take time for many of our new initiatives to gain traction; and that is why we announced on our last call in October that we are suspending giving forward-looking guidance.”
However, the company is confident the actions outlined in the plan can deliver higher levels of profitability in the future.
“During a transition of this nature, it is extremely hard to forecast what revenues will look like several quarters out,” Mr. Birnbaum said. “While we’re not providing an outlook for 2015, I will say that we have every intention of returning the company to profitable growth in 2016 and start working toward the strong margins we know this business model is capable of generating.”
As for the Ultimate, SodaStream’s multi-functional beverage maker in development, executives declined to disclose much information, given its competitive situation. Keurig Green Mountain is set to launch the Keurig Kold single-serve cold carbonated beverage dispenser later this year.
Mr. Birnbaum said his company has spent two and a half years and more than $5 million creating the appliance, which will be equipped with an internal carbonation chamber, as well as the option to connect with a home water line.
“It is not a spin-off from coffee or anything like that,” he said. “It’s not a caps type of single-serve solution, which I’m not sure is applicable for the soda, for the cold beverage environment. It has Internet of all things, so it will be able to interact with your smartphone, and interact with us and have auto replenishment of consumables and all kinds of other interesting features.
“And it integrates hot and cold in one. I don’t know if there’s a feature that any consumer today would dream of having that this machine could possibly do, other than a back massage.“And it’s coming. And it’s going to change the landscape. And we can’t wait to show it.”