SodaStream: How the at-home carbonation device has become so popular so quickly.

Commentary about business and finance.
July 8 2011 12:45 PM

Get Busy With the Fizzy

How SodaStream, the at-home carbonation device, has become so popular so quickly.

SodaStream product shot.

Few gadgets justify their place in the home. A silicon tube to remove garlic skin? A bug vacuum? A skinny, foot-tall soda maker? That's a different story. The SodaStream, a device that makes carbonated water and flavored sodas in a flash, has long been popular in Europe. Now, it is hitting it big in the United States, even though its American rollout started only last year. (It's also popular at Slate: At least half-a-dozen staffers, including me, own one.) So how did a device that meets a desire that few people knew they had become so popular so quickly?

Making your own fizzy drinks has been possible for a surprisingly long time. Back in 1772, the great British scientist Joseph Priestley published a paper on his method (PDF) for making soda water to aid digestion and help cure scurvy. (In truth, it does neither.) "All that is necessary … to make this process expeditious and effectual, is first to procure a sufficient quantity of this fixed air [carbon dioxide], and then to contrive a method by which the air and water may be strongly agitated in the same vessel," he wrote, along with a diagram of bowls, bottles, and tubes. At the beginning of the 20th century, the Compressed Gas Capsule Company of New York City was one of several selling at-home seltzer-water devices.

SodaStream's own corporate roots extend back more than a century. The heir to a gin fortune invented the first SodaStream in 1903, and the company made a splash in the United Kingdom in the 1970s and 1980s with its famed jingle, "Get busy with the fizzy." (Given soda's cozy relationship with scotch, the line "Get buzzy with the fizzy" inevitably followed.) But the company fell on harder times in the 1990s. For a decade, the at-home machines were mostly unavailable. Consumers opted for ubiquitous, increasingly cheap cans, bottles, and fountain drinks.

But home carbonators do offer advantages to the true aficionados of seltzer and soda, such as myself and many of my fizz-addicted friends. For one, they're massively cheaper. A can of Coke costs about 40 cents, if you buy a 12-pack and bring it home. A bottle of seltzer from the grocery store costs about $1.20. Producing the same products with a home system costs half that or less, and it takes less than a minute. You can control your level of carbonation, as well. (The 10-hit fizzy water is a strange, powerful thing.) Moreover, the machines are much more environmentally friendly, as customers reuse the plastic bottles.

Under new Israeli management and focused on those selling points, SodaStream underwent a global relaunch in 2009. The company had redesigned its machines. It reformulated the mixes you can add to the carbonated water to make flavored soda, emphasizing the quality and healthfulness of ingredients. It introduced new models, including one that looks like a penguin. (I covet it.)

It is working. Globally, sales climbed from 730,000 units in 2007 to nearly 2 million in 2010. In the first quarter of 2011, the company sold 592,000 machines. About 80 percent of sales are outside the United States. (Europeans love soda makers. They are most popular in Denmark and Sweden, where one in five homes have one.) But SodaStream is focusing intently on the big, soda-loving U.S. market.

Sales volume has climbed 189 percent year-over-year here, as ubiquitous big-box retailers such as Bed Bath & Beyond, Williams-Sonoma, and Kohl's have begun carrying the product. (JCPenney and Best Buy signed up this year, too.) And the market is "maturing," in the company's parlance. Right now, starter kits are the best-selling item in the United States. But as time goes on, sales should shift to the soda mixes (diet grapefruit, root beer, etc.) and to refillable carbon dioxide canisters. Those products are much higher-margin, the company notes.

It has turned Wall Street bullish on the still-tiny, still-niche company, whose Nasdaq ticker is SODA. Jim Cramer, for instance, has featured the product more than once. Many analysts have a "hold" rating on the stock, given its ambitious price-earnings ratio. But they still laud the company. "[It] has defied the skeptics, taking a seemingly stale brand in Europe globally while driving better than expected growth and margins in its home market," Deutsche Bank's analysts wrote last month, while warning that the company needs to focus not just on new-unit sales driven by costly advertising, but on making sure customers come back for new canisters and soda mixes. And several analyst reports mention customers' giddy, fizzy love for the product.

There is competition that could knock SodaStream from its spot, though. Customers also love the iSi Twist N Sparkle, which retails for about $30 less than the SodaStream, at $49.95. (It also can carbonate juices directly, whereas the SodaStream carbonates only water, to which concentrate is added.) There are plenty of old-fashioned, if sometimes newly designed, siphons and capsules to make soda at home. And if Coke or Pepsi decided to make concentrate for their brands available on another at-home machine, it could seriously damage the company's business. But for the moment, it is SodaStream people are getting busy with.

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