Branding is extremely important in the beverage industry and many of Sodastream's syrups are as generic as they come with names like Cola and Root Beer. There are some flavors that have some powerful brands from third parties such as Ocean Spray and Kool Aid, however as I said these are third party brands and aren't owned by Sodastream.
Which do you think make a better investment, The Coca-Cola Company (NYSE: KO) or the many independent bottlers that Coca-Cola sells its syrups to? While Sodastream may have built a powerful brand as an at-home soda-maker and carbonator provider, I believe it should complete the circle with powerful syrup and flavors brands of its own and focus on marketing those as well as the soda-makers.
Home only use
A look at the latest filing of Coca-Cola reveals that 38% of its revenue was generated by the sale of syrup concentrate to third parties. That means that Coca-Cola generated almost 2/5 of its revenues from sales at restaurants, movie theaters, etc. Sodastream can only act as a substitute for beverages consumed at home. It's not likely you will see a Sodastream at McDonald's any time soon. People also like to consume much of their beverage intake away from home such as when they are at the beach, at the gym, or at the mall. This is evident by the success of the bottling water Industry; 40% of water consumed in the US is in the form of bottled water....." TBC
"This reduces the potential market for Sodastream relative to companies such as Coca -Cola or Pepsico (NYSE: PEP) unless Sodastream can provide an innovative way to let people use its products away from home.
CO2 exchange headaches
One of the selling points of Sodastream is how it simplifies life for the soda buyer-- no longer will a person need to carry on with the chore of lugging over dozens of cans from the grocery store and find the space to store them in the fridge. Nor will that person have to deal with all the garbage that these cans and bottles generate or have to deal with properly recycling them.
That pitch however ignores how much of a headache CO2 exchange can be. Sodastream CO2 canisters were deemed by the Department of Transportation to be Hazardous Materials (HAZMAT) last February and thus can no longer be delivered by couriers to places of residence. The proprietary valve of Sodastream carbonators prevent customers from filling the carbonator with CO2 any way they like. Sodastream's CO2 carbonators have to be filled out only at authorized third party retailers. The cost of refilling CO2 also eats into the cost benefit that Sodastream provides to its users over buying regular soda as users have to pay a high price to fill the carbonators.
This is a double-edged sword; on the one hand it offers Soda Stream a high margin business that is not easy to duplicate; on the other hand it is a hassle for the customer which can reduce the desire to use the soda-maker in the future."