Sunday, November 30, 2014

Some Advice for SodaStream

[Note: This post was published yesterday exclusively for my Patreon supporters ... they don't get to see everything first, but I do share some things with them first. Become a patron today!]

Yes, my family has a SodaStream machine. We bought it on clearance, fairly cheap, during last year's after-Christmas sales period. I wasn't paying attention to the politics at the time, so I'm going to address those first before getting into the meat of the post:

SodaStream is an Israeli company and some Israel boycott activists have targeted it because it ran a plant -- one which it is now closing -- in the occupied West Bank. Even if I had been paying attention to those politics, we'd probably have still bought the unit. In my opinion, commerce between Jews and Arabs in Palestine is a primary path toward peace. People who are working with and trading with each other find their incentives to fight with each other reduced. So that's my brief take on the politics. Now to the question of how SodaStream makes, or should make, its money.

The company's third quarter 2014 profit/loss report was apparently pretty miserable. Sales of the machines and their after-market requirements -- CO2 tank refills to carbonate water and flavors to make that carbonated water into soda -- are down.

In response, SodaStream is changing its marketing strategy from promoting itself as "this is a machine for making soda at home" to "this is a machine for making flavored sparkling water at home."

Although that marketing strategy change is apparently buttressed by trend numbers that say soda is becoming less popular while flavored seltzer is becoming more popular, I still think the change is a mistake.

SodaStream is trying to stay "high end." They want to play Apple/MacOS/iOS to the regular soda market's Windows PC/Chromebook/Android tablet (where Coke and Pepsi are Microsoft and Google and the store brand sodas are those cheap Chinese knockoff tablets).

But carbonated beverages are not, for the most part, high-end products.

I don't know about most people, but when I buy soda I buy the store brand unless there's a REALLY good sale on the name brand (and sometimes even then, because the Publix store brand diet sodas are sweetened with sucralose instead of aspartame).

SodaStream didn't set out to compete on price -- by the time you pay for a CO2 tank fill and the syrup, the end product is a little cheaper than Coke or Pepsi (at full price) but more expensive than the store brand sodas.

SodaStream's initial selling points were "you don't have to lug a bunch of stuff home from the store every week" and "you don't have a ton of cans and bottles filling up your trash or recycling bin."

Now it's time for SodaStream to become competitive on price, too, if for no other reason than that if they don't, they'll eventually face price competition even in the home soda brewing market.

  • The SodaStream machine sells for $70-$100. Guys, it's a piece of plastic that pumps CO2 from a tank into a bottle. The technology is what, 125 years old? Even if there are patented aspects of it, those patents will run out soon. Time to get the retail price of the machine below $50, including the first CO2 tank.
  • SodaStream uses proprietary CO2 tank threading, which allows it to charge about $15 for a tank refill. There are already companies selling adapters that let SodaStream users run their machines using normally threaded tanks. I called a couple of local sporting goods stores to ask about paintball tank refills. They run about $3, for a lot more CO2 than you get in a SodaStream tank. SodaStream needs to get its tank refill charge down below $10, preferably more like $5.
  • SodaStream's syrup flavors cost $5.97 at Wal-Mart. That price point definitely needs to come down to the sub-$5 range. $3.97. Maybe even $2.97.
If SodaStream does these things, it becomes price-competitive even with store brand sodas, while continuing to enjoy the other advantages those sodas don't offer: Mom doesn't have to wear out her lower back carrying around cases of 12-ounce cans or multiple 2-liter bottles; the trash can at home isn't overflowing with empty soda containers; the kids still get to have fun "making their own soda."

If SodaStream doesn't do these things, someone else will. And when someone else does, no, there won't be a "high end" of that market that's big enough for SodaStream to make a profit from.

Like the old saying says, "go big or go home." Or, in SodaStream's case, "go inexpensive consumer product or go broke."

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