3 Reasons SODA Stock Has Lost All Its Pop

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Over the past 12 months, shares of do-it-yourself soda maker SodaStream International Ltd. (NASDAQ:SODA) are down 43.5%. A two-year chart is even worse; SODA stock has lost more than 65% of its value in that time.

soda stock SodaStream stockDespite a meteoric SODA stock price in 2011 and again in 2013, it would appear SODA stock is still fizzling out.

Let’s take a closer look at three reasons why you’re better off without SODA stock.

SODA Stuck in a Niche Market

The SodaStream beverage maker is, was, and always will be a niche product, being sold to a niche market.

Most people are willing to wait a few minutes for coffee, because we have been conditioned to wait for it. When we brew it at home, we wait; when we get it at a Starbucks Corporation (NASDAQ:SBUX), we wait. But, when it comes to carbonated drinks, the only waiting is for how long it takes to pop the top.

In addition to the time it takes to make a beverage with a SodaStream machine, the cost savings as opposed to buying a 12-pack or case of soda are minimal or perhaps non-existent. One author crunched the numbers and found the average generic liter of soda cost 89 cents, while the mix and carbonation for a SodaStream machine costs 67 cents.

But, that figure doesn’t account for what the machine itself cost you to buy, let’s call that $130. So it would take about 590 liters to recoup your cost of buying the machine, before you begin to save money with the SodaStream machine. That’s a lot of soda.

And, unfortunately…

The Soda Market Is Dying

Fortune magazine recently reported that sales of carbonated soft drinks dropped 0.9% from 2013 to 2014. That marked the 10th consecutive year soda sales have declined. From 2013 to 2014, The Coca-Cola Co (NYSE:KO) experienced a soda volume decline of 1.1% while PepsiCo, Inc. (NYSE:PEP) saw a drop of 1.4% in its soft drinks category.

These are two of the largest companies in the world, selling one of the most recognizable products in the world, and they are seeing sales falling. This highlights the fact that people in general and all around the world are drinking less soda.

Most would point to the health issues with soda as the cause of decline, but the rise of energy drinks — which are certainly less healthy than soda — suggests otherwise. Honestly, it doesn’t matter much why people are drinking less soda; the trend is clear. Fewer machines are inevitably going to be sold because fewer people are going to want one.

Misperception

Lastly, it would appear that even SodaStream is slightly confused about what exactly the company does. The name of the company is SodaStream; we’re talking about SODA stock. Everything about the company says “Soda.”

And, yet, because there is a negative, unhealthy stigma attached to soda, SodaStream is rebranding itself. The new tagline for SODA is “water made exciting.” Sure, carbonated water is often called soda water, but there’s still a lot of mixed messaging going on between the company’s name and its slogan.

The company name has Soda in it, and therefore consumers will always think of it as a soda-maker first, possibly other beverages second. But trying to now become a “water” company? Really, SodaStream, you’re not Fiji or Dasani.

At the end of the day, SodaStream management has a long, rough road ahead of itself, and overcoming all these issues appears to be a bigger task than is manageable in any meaningful time period. With many investment options we have, you have a more options that are a lot better than SODA stock right now.

As of this writing, Matt Thalman was long KO and SBUX. Follow him on Twitter at @mthalman5513.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/05/soda-stock-sodastream-pop/.

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