Growth has SodaStream thirsting for acquisitions
Company on the offensive after switching strategies and turning sales around in 2014
TEL AVIV— SodaStream International Ltd., which makes machines to carbonate tap water at home, is looking to acquire companies and beef up marketing in key countries to keep its turnaround going.
The world’s biggest soda-water company sold three million units in the last 12 months, boosting its customer base 4 per cent from the end of 2016 to 11.5 million households, chief executive officer Daniel Birnbaum said in an interview. With about $100 million in cash and no debt, SodaStream is planning to spend to keep the momentum going.
“We’re on the offensive now,” Birnbaum said at SodaStream’s headquarters in Airport City, Israel. “We can buy companies, we can advertise more aggressively. We’re growing.” He didn’t specify which businesses SodaStream is targeting.
SodaStream’s willingness to spend reflects how far it’s come since switching strategies in 2014. With sales and income flagging, the company moved away from at-home cola machines that competed in a $260-billion market against giants such as Coca Cola Co. and PepsiCo Inc. Skeptical investors punished the stock, which bottomed out in February last year. With the shift to sparkling water, SodaStream’s profits almost quadrupled in 2016. Its U.S.traded shares have surged 342 per cent since the recent low.
Birnbaum plans to focus the company’s efforts in places such as the U.S., Japan and Australia. SodaStream is seeing sustained growth across Europe, which accounts for about two-thirds of sales, he said.
That reliance on Europe has hurt SodaStream in the past. The company — which reports in U.S. dollars — lost about $50 million in sales in both 2014 and 2015 when the euro lost 22 per cent of its value versus the greenback, Birnbaum said.
“We learned our lesson from that,” Birnbaum said.
Founded more than 100 years ago in the U.K., the company’s global profile has risen only in recent years. It generated headlines around the world as the target of the Boycott, Divestment, Sanctions (BDS) movement, which said the company’s factory in the West Bank perpetuated Israel’s occupation of the Palestinians. Birnbaum describes the plant as a hothouse of coexistence, where 350 Israeli Jews worked side by side with about 500 Palestinians and 450 Israeli Arabs.
SodaStream closed the plant in October 2015 and relocated to a new campus in Rahat, in Israel’s south (BDS continued to call for a boycott of the company). Birnbaum denies that BDS pressure played a role in the decision, saying the move was long planned as part of his growth strategy. But he allows that anti-Israel activists helped etch SodaStream’s name in the public consciousness.
“BDS helped build brand awareness,” he said. “We should pay them royalties.”
Some 1,600 people work in the Rahat factories, about half of them Arabs. Last month, 74 Palestinians from the West Bank were given permits to work in the new factory.
Birnbaum says the Israeli government should double the amount of work permits for Palestinians. That would help alleviate both the shortage of manual labour in Israel and unemployment in the West Bank, which the World Bank pegs at 18 per cent.
“The solution is pretty clear,” Birnbaum said. “The Israeli economy can absorb another 100,000 Palestinians workers. This would change the economic landscape in the West Bank and Israel and create a climate for coexistence and dialogue.”
While promoting peace is one side of the SodaStream ethos, the company also markets itself as a greener way to consume soda. Each SodaStream bottle can be used for 30,000 fill-ups, reducing the amount of plastic waste, Birnbaum said.
SodaStream’s chief has been waiting for a strong pickup in environmentally conscious consumerism in the U.S., which investors have identified as the company’s next big opportunity. Only about 1.25 per cent of American homes have soda machines, trailing the 10-20 per cent in most countries in which SodaStream does business, Birnbaum said.
American consumers are “slow to change habits,” especially regarding issues of sustainability, Birnbaum said.
The company reported $115 million in revenue in the Americas last year, or 24 per cent of the total.