PepsiCo Places $3.2 Billion Bet On Water With Sodastream Buy
Five years ago, SodaStream’s attempt to mock big soda makers in a Super Bowl ad was blocked. Now, the maker of countertop carbonating devices is “honored” to be sold to one of them. PepsiCo Inc. is paying $3.2 billion for SodaStream International, a clear indication of sparkling water’s enduring popularity.
SodaStream promotes its countertop devices that let people carbonate their own water as a healthier and more environmentally-friendly alternative to exactly the kinds of drinks PepsiCo is known for.
“Stop your addiction to sugary soda,” reads a quote from trainer Jillian Michaels on the SodaStream site. She also stars in a TV spot for the brand.
Both Coca-Cola Co. and PepsiCo already have their own sparkling water brands, which compete against a range of brands from Nestlé Waters and others such as La Croix and Spindrift. The deal is the latest signal that traditional soft drink makers need to look beyond their own lineups to meet today’s changing tastes. Just last week, Coca-Cola agreed to buy a minority stake in sports-drink maker Bodyarmor, whose backers include former basketball star Kobe Bryant.
Ad watchers might recall SodaStream made a Super Bowl ad that CBS rejected in 2013 because it was set to show delivery drivers in Coca-Cola and Pepsi clothing. A brand-less version, still featuring exploding soda bottles, ran during that year’s game. And SodaStream returned in 2014 with a spot featuring Scarlett Johansson.
“PepsiCo and SodaStream are an inspired match,” PepsiCo Chairman and CEO Indra Nooyi said in a statement. Ramon Laguarta, who is set to take over the CEO role from Nooyi in October, called SodaStream “highly complementary and incremental to” PepsiCo’s business, adding to its growing water portfolio, in his words, “while catalyzing our ability to offer personalized in-home beverage solutions around the world.”
In other words. if people are going to make their own drinks and are looking for better-for-you options, the maker of Pepsi and Mtn Dew should try to win more of that business. It’s not like it hasn’t tried. In February, PepsiCo introduced a new sparkling water brand, Bubly, and announced the U.S. rollout of the flavor-your-own water vessel and pod product, Drinkfinity.
SodaStream CEO Daniel Birnbaum, meanwhile, said his company is “honored to be chosen as PepsiCo’s beachhead for at-home preparation to empower consumers around the world with additional choices.”
PepsiCo is paying a hefty sum for an established brand that, as long as people keep using the product, means repeat business. SodaStream operates with a “razor and blade”-style model — customers buy the device, a reusable bottle and a carbonation cylinder, which needs to be replenished once it runs out. Plus, they can also buy drink mixes from the company to flavor the water once it’s been carbonated.
It could be a safer, albeit pricier, bet than the one Coca-Cola made a few years back.
In 2014, Coca-Cola paid $1.25 billion for what was initially a 10 percent stake in Green Mountain Coffee Roasters (then the name of the company behind Keurig K-cup machines). But Keurig Kold, a cold-drink system the two companies worked on featuring Coca-Cola brands, was discontinued in 2016 due to weak demand after less than a year on the market. Coca-Cola sold its stake in Keurig, which had risen to 16 percent, when Keurig was sold to JAB Holding Co.
Fast forward a few years, and now Keurig has teamed up with another soft drink rival, as it merged last month with Dr Pepper Snapple to form Keurig Dr Pepper.