I’m in complete agreement that CO2 is SODA’s most valuable competitive moat. More specifically, the CO2 exchange system they have in place with retailers makes it almost impossible for a competitor to enter the market and require retailers to exchange a second CO2 system.
But why does CO2 need to be exchanged?
Why couldn’t GMCR sell a one-time use disposable CO2 canister?
I understand that there’s a cost associated with throwing away the canister after one use but it’s often been stated that SODA’s gross margin on CO2 is 90%. What does a CO2 canister cost…$3.00-4.00? So GMCR eats the cost of the canister on every CO2 sell and their gross margin is 55-65%. That’s still a great margin and certainly far higher than GMCR’s current gross margin of low 30%.
Eliminating the need to exchange CO2 would be a huge competitive advantage. It would be a very attractive selling point to retailers to not need to deal with the hassle of exchange. And it would create a very attractive benefit to consumers to not need to make an extra trip to exchange the canisters.
I also realize that throwing away the canister after one-use defeats the "green" theme of making soda at home but the "green" theme is SODA's selling point. Convenience could be GMCR's point of difference. The majority of consumers will choose convenience every time.
for years all i've done is just carbonate cold tap water, my sodastream was a gift. I love it! but wouldn't've bought it years ago - if it weren't presented to me. I am eager to try their real sugar, high-calorie cola, but cant find it in stores in the Baltimore area. i dont like diet and think that's why their regular cola tastes funny to me - sucralose or something.
I don't care at all for being green, i rate convenience and performance - aka makes real soda water as the biggest reasons for my continued use and recommendations. No lugging bottles of seltzer or cola and i've little storage if i did want to stock up on all that - i am in a city and carry my groceries so no way am i going to carry lots of colas to stockup - this is much better!
now however i realize all the neighborhood bars near me have awfully flat soda guns - such that i rarely order any x and soda and lemon from them.
some cocktail bars nearby use bottles of soda for patrons' drinks, they may save money and energy, human work energy that is, by using a big sodastream instead of storing and lugging their soda water.
I hope they're making money off my CO2 only refills!
Sodastream doesn't have a 90% margin on CO2 canisters. They have a 90% margin on refills, when the same canister is refilled. In past conference calls Birnbaum has stated any competitor would have to spend 10s of millions of $ just in canisters to build out the network.
Now consider disposable canisters. More cost per use, extreme liability of having a compressed gas in a less robust container....... Doesn't pass the sniff test. You are going to compress a gas that the DOT classifies as hazardous in what kind of material? What kinds of abuse will consumers subject these containers to? What will happen when they expire when they sit around under pressure for years in someone's hot garage?
As a separate the trademark Karbon has already been claimed by a company that provides hot and cold water. There is going to be a fight there.
As Seth pointed out, using CO2 impregnated zeolite powder to carbonate a drink from a capsule doesn't work. It has been tried in the past both by Coke and P&G. It is a 30 year old idea that never panned out.
Dr John, as long as they use the same robustness of a canister, then they will assume the same liabilities as SODA's canisters. So the question is how much does it cost for a robust canister? In a material perspective, it's really hard for me to see that it costs more than $5.
You could and it is done, but the price of a disposable cartridge is 3 times what you pay for a refill of SODA and like you said defeats the green purpose. Green is the whole point. I think you are minimizing that fact. Convenience plays a good role but not according to the surveys provided by SODA.
I agree with Blue on this one. To me, the top three reasons for buying a SODA home-carbonation system instead of consuming store-bought carbonated drinks are (i) it's greener, (ii) it's healthier, and (iii) it's cheaper. There are, of course, other reasons, but these are the big three for me. A disposable CO2 cannister destroys two of the three advantages of SODA. If anyone went with a disposable cannister, it would make SODA look far superior by comparison. I don't think the convenience of the disposable cannister would offset the loss of the green and cost advantages.
Sentiment: Strong Buy
Disposable is a great idea Burgh. I think convenience to both retailers and customers plays a greater role than whatever survey results provided by SODA. Disposable is probably more green in a net-aggregate perspective, by encouraging a lot more home soda drinkers, thus reducing a lot more traditional cans and bottles.