PepsiCo will buy carbonated drink-machine maker SodaStream for $3.2 billion, as it battles Coca-Cola for an edge in the health-conscious beverage market.
SodaStream CEO Daniel Birnbaum said that not only will SodaStream stay in Israel, but the company expects to expand significantly. He and PepsiCo President Ramon Laguarta announced the deal at a news conference in Tel Aviv on Monday.
Responding to a question posed by The Jerusalem Post
, Birnbaum said that SodaStream had recently decided to build an additional factory in the Bedouin city of Rahat, close to its existing factory in Lehavim. The Rahat factory will employ a few hundred additional people from the Negev.
“PepsiCo is completely behind that program so we are not only restricting cutting, we are growing,” Birnbaum said. “This deal is an accelerator for the business. We are going to continue investing in Israel and we will grow as much as we need to grow to service the consumer.”
“We count on growth,” asserted Laguarta. “SodaStream is present in many markets, but there are still many opportunities in both opening to new markets, and in penetrating existing new markets, so we see this as a growth. We count on growth and investment synergies... We’re not going to give our shareholders value by cutting costs, but we will give them value by growing SodaStream at a faster pace.”
As Birnbaum said in his opening words, “This isn’t an exit, it’s an entrance.” He had addressed his father, Ervin, during his opening speech as he spoke about the Exodus 1947, the ship that was turned around by British soldiers upon its arrival to Mandatory Palestine in 1947. Ervin was one of the passengers on that ship, and after landing back in Germany, 22 years later he made his way to the Negev with his wife.
“Who would have believed, Dad, after you lost your family, that you would get to this moment to see a thriving country, to take the ashes of the Holocaust and turn it into a moment of glory and pride,” Birnbaum said. “And this is a defining moment in the state of Israel´s journey.”
Prime Minister Benjamin Netanyahu hailed the deal.
“The recent large acquisitions of Israeli companies demonstrate not only the technological capabilities, but also the business capabilities that have been developed in Israel,” he said. “I welcome the huge deal that will enrich the state coffers as well as the important decision to leave the company in Israel.”
Laguarta said the day had been a major milestone for both companies. The pair had visited the factory in Lehavim in the morning, and Laguarta noted that PepsiCo had committed to keeping the business in Israel for at least 15 years.
“But I think it will be forever,” he said. “It has demonstrated it’s a successful company, so why would you derail from what is a very successful business?”
PepsiCo’s acquisition of SodaStream, which today markets itself as a sparkling water maker to appeal to younger and more health- and environmentally-conscious consumers, comes as it battles Coca-Cola for an edge in the health-conscious beverage market.
SodaStream, which strives to reduce its environmental footprint with its sale of reusable bottles and homemade soda-makers, has in the past slammed PepsiCo for the environmental damage it causes, even running aggressive marketing campaigns against it.
“We plan to let SodaStream continue with its position, feel proud of what they are,” Laguarta said on this point, alongside efforts to make the rest of PepsiCo business more sustainable and will not interfere with SodaStream’s marketing practice.
He said it’s not an “either/or” strategy but an “and,” meaning that while PepsiCo is committing to making recyclable bottles and it moving toward more sustainable methods, it will not stop selling plastic. Plastic, he said, should be valorized, and not thrown away.
“They made it clear to me that they are acquiring SodaStream because of who we are,” Birnbaum added. “We provide alternative solutions to consumers... our marketing will continue to be disruptive. There is a changing world out there, single-use plastic should stop and we are part of that change together with PepsiCo now.”
SodaStream marketing campaigns have also been targeted by BDS in the past. In 2014, actress Scarlett Johansson appeared in a number of SodaStream advertisements, coming under fire from Oxfam, for which she served as global ambassador. Oxfam expressed its disapproval due to SodaStream’s main factory then being situated in Mishor Adumim in the West Bank. Johansson resigned from her Oxfam position and defended her role in SodaStream.
In 2016, the company’s move out of the Mishor Adumim in the West Bank to the Negev Bedouin town of Rahat led Boycott, Divestment and Sanctions to proclaim its victory over SodaStream, while opponents argued that pressure from the boycott movement had actually contributed to the unemployment of more than 500 hundred Palestinian workers.
SodaStream is still one of BDS’s targets for what the movement claims as SodaStream’s “role in ethnic cleansing of Palestinians in the Negev.” Today, SodaStream’s employment of 400 Bedouins makes it the largest employer of Bedouin in Rahat, Birnbaum said.
When asked about BDS during the press conference, Laguarta said, “We operate in 200 countries around the world and we value diversity and what everybody brings so we feel comfortable with who we are.”
He added that PepsiCo has been doing business with Israel for years and has a strong partnership with food product giant Strauss Group.
PepsiCo didn’t sell to Israel until 1991. Several Israeli and Jewish organizations accused it of yielding to the pressure of the Arab boycott, which the company has denied.
Political figures and parties from across the spectrum responded to the sale in reference to the company’s history as a BDS target.
“BDS tried and failed to destroy SodaStream, now bought by PepsiCo. SodaStream, which formerly employed Palestinians from Judea and Samaria, and now hires Israeli Bedouin, is a champion of innovation and coexistence,” said Michael Oren, former ambassador to the US. “The sale is a victory for Israel and a defeat for BDS.”
Deputy Director of the World Zionist Organization and Head of the Antisemitism Department Yaakov Haguel also responded to SodaStream’s buyout.
“This is a day of celebration – this is a sign of victory against the BDS who are constantly fighting against blue-and-white companies, which proves that politics must be left aside and we must maintain robust trade,” Haguel said. “The stickers that are affixed to their products will say, ‘Made in Israel.’ This product is produced by Arabs and Jews working side by side in peace and harmony.’
SodaStream proves that there is nothing to be afraid of – we must continue to grow and show joint work without racism, which will contribute to the success of the Israeli economy.”
The Meretz Party responded in a different vein and tweeted, “Greetings to SodaStream – the proof that good things happen when you leave the settlements.”
SodaStream’s shares have jumped 85 percent this year after a 78 percent increase in 2017, and have moved to $130 from $16.31 at the end of 2015.
In second-quarter results issued earlier in August, SodaStream’s revenue grew 31 percent to $171.5 million, driven by growth in Germany, France, Canada and the United States, while net profit rose nearly 82 percent.
PepsiCo will acquire SodaStream for $144 per share in cash, representing a 10.9 percent premium to the Friday closing price of SodaStream’s US-listed stock, according to Reuters. PepsiCo said it will fund the deal with cash on hand.
PepsiCo’s acquisition of SodaStream is expected to be finalized by January 2019.
Reuters and Jerusalem Post Staff contributed to this report.
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>