The IPO of SodaStream International Ltd., the company that developed a system
for making sparkling drinks at home, which has won the title of IPO of the Year,
brought back forgotten memories.
We were children. Our parents tried to
wean us off Coca Cola, and they bought a system from the company (then known as
Soda Club) that was mainly for producing sparkling water and raspberry soda. The
start was promising: We got excited at the noise the thing made as it produced
the sparkle – and that we could have fizzy drinks without making the trip to the
local store. We even began to become used to the different taste.
some point – I don’t remember exactly when – the system was put away in the
depths of the storage cupboard at home, and we went back to cans. Soda in its
various forms came into use only for removing particularly stubborn stains, and
now, to be honest, I’m not sure whether I would buy the system for my own
“The Israeli consumer doesn’t understand SodaStream in its current
format,” says Daniel Birnbaum, CEO of the company, in an exclusive interview
“This is an ‘old economy’ company, with products that are no
longer relevant” Nevertheless, its success in the US capital market raised
eyebrows in the Israeli investment community, he says, adding: “When you expose
SodaStream to a foreign investor, say an American, the company is perceived as
innovative, with a technological anchor, and, no less important, as
Relevant or not, SodaStream is a hot item: Mega-hot. In early
November, in an IPO on Nasdaq, it raised $125.3 million at $20 per share, making
it the eighth-largest Israeli IPO of all time in the United States. In less than
four weeks, the share price doubled, though it has since subsided to $33, giving
it a market cap of $607m. These figures make SodaStream, for the time being at
least, one of the biggest Israeli companies by market cap on the US capital
market, and one of the most successful flotations there.
speaking from the company’s offices in New Jersey, has no difficulty explaining
how SodaStream attracted so much attention from US investment institutions. “I
found an open door and attentive ears,” he says.
Globes: But the success
of the IPO was presumably also thanks to the rising market.
“That may be so. We planned the IPO at the start of the year, when things were a
little more difficult. Fortune smiled, and we launched it in a fairly fruitful
week on the primary market.
Nevertheless, not all the IPOs made that week
were as successful as ours, and so I don’t think that we rode a wave, with no
connection to the company and its products.”
Several reasons can be found
to explain why investors flocked to SodaStream, but there’s no doubt that one of
them was its financial results.
SodaStream, which has been operating in
its current format for 19 years, had revenue of €68.7m. in the first half of
2010 (most of the company’s revenue derives from activity in Europe, and it
therefore reports in euros), representing year-onyear growth of 50 percent. Net
profit was €4.2m., compared with €472,000 in the corresponding
SodaStream, Birnbaum says, sees itself as player in the same
market as giants such as Coca Cola and Pepsi, the global carbonated beverages
market, which had a turnover of $206 billion in 2008, of which soda water
accounted for $27m.
“If we do our work right, we can take a certain
market share in the beverages market, perhaps even from giants like Coca Cola,”
Is it not a little pretentious on your part to challenge a giant
like Coca Cola? “Perhaps, but the investors believe its possible, as I
Birnbaum stresses that SodaStream’s beverages, unlike those of Coca
Cola and other manufacturers, answer three important needs, hence the enthusiasm
about the company.
“The first need is healthy nutrition,” he says. “More
and more people are switching to low-calorie, low-sugar, low-sodium food and
drinks, and the company’s beverages answer that need.
“The second need is
environmental: that is, consumption of products that don’t require storage and
recycling and don’t damage the environment like plastic bottles.
third need is financial saving. Consuming a soft drink produced by SodaStream is
much cheaper than the traditional beverage.”
Birnbaum’s last claim is
SodaStream’s activity is based on four product units. The
first product is the system itself, the price of which in the US varies from $79
to $199. The second is the carbon-dioxide balloon, which costs $15 for a refill
to make 60 liters, or $25 for 110 liters. The third is one of the flavors: $5
for 500 milliliters of concentrate (enough to make 12 liters of drink). And the
fourth is the container bottles: $15 for two additional bottles beyond the first
one. In other words, you have to invest quite a bit to maintain one of the
company’s home systems.
“The US consumer consumes double the quantity of
soft drinks that his European counterpart consumes,” Birnbaum says, explaining
the potential of the US market, to which the company will direct most of its
efforts in the coming year.
But in the end, it’s the taste that counts.
And it’s not certain that the American consumer will be prepared to adopt
something that tastes different than Coca Cola or Pepsi.
and for that reason we are doing taste tests that compare our product with those
of companies like Coca Cola. Coca Cola is a super-brand, and I know that I can’t
compete with the taste of Coca Cola or Pepsi. I’m aware of that. We have a cola
with a different taste, and it presumably will not be to the liking of anyone
already addicted to Coca Cola’s beverages. However, there are very many people
who are not addicted to the specific taste of Coca Cola.”
succeeds in convincing the American consumer – if it ever does – that there is
such a thing as a cola besides Coca Cola, the company will continue to
consolidate its activity in Europe, which accounts for most of its sales. Sweden
leads the way on the continent (Birnbaum says a fifth of all households in
Sweden have the company’s product).
SodaStream is also active in Germany
and in New Zealand.
Activity in Israel is negligible, which Birnbaum
attributes to the Israeli consumer’s erroneous perception of
“Israelis are prejudiced about the company,” he says. “The
gap between perception and reality is unique to the Israeli
Despite this, Birnbaum has not given up.
“Perhaps, in the
future, we will bring the SodaStream message to Israel, too,” he says, in a
heavy American accent.