SodaStream: Israel Isn’t Providing Promised Aid for Plant Inside Green Line

CEO Daniel Birnbaum says company will now be developing much smaller facility at Negev site than planned, employing 1,500 fewer employees.

SodaStream, the company at the center of a firestorm over its West Bank manufacturing facility, said Sunday that the Israeli government has failed to deliver on the tens of millions of shekels of aid it promised to develop a giant factory inside Israel itself.

Daniel Birnbaum, CEO of the company that makes devices and syrup used to make fizzy drinks at home, said that, as a result, SodaStream was downsizing the planned expansion of its factory in the Lehavim industrial zone (in Israel’s southern Negev region). Instead of investing 300 million shekels ($86 million) in Lehavim, in a facility that would employ upward of 2,000 people, SodaStream will spend just 119 million shekels and take on just another 500 employees, he said.

A substantial number of employees that the company expects to recruit come from the Bedouin population that lives in the area, near Be’er Sheva, he added.

“In addition to the front with the global boycott against Israel, we are engaged in a cold war with the government. It’s a cold war, because we’ve simply had no contact with the government,” Birnbaum said.

SodaStream found itself in the crosshairs of the global boycott, divestment and sanctions movement last month after it recruited the actress Scarlett Johansson to appear in its advertising campaign, including a spot to broadcast during the U.S. Super Bowl.

Both the company and the actress have rejected the criticism, citing SodaStream’s record of creating well-paid jobs for hundreds of Palestinians at its plant in Mishor Adumim, an industrial zone in the West Bank. Birnbaum has since termed the Mishor Adumim plant location “a pain in the ass.”

Birnbaum claimed that the previous government of Prime Minister Benjamin Netanyahu had made a commitment to SodaStream to award it subsidies equal to 32% of the 180-million-shekel expansion planned for its Lehavim site. That included a 20% investment grant due under Israel’s Law for Encouraging Capital Investment, for which it received clearance in writing, as well as another 12% designated as a Negev-development grant and an unspecified “special” grant, Birnbaum said. The latter two were only promised orally, he conceded.

“I’ve tried to make contact with Economy Minister Naftali Bennett for half a year and he hasn’t found the time to meet with me,” said Birnbaum. “He has here an Israeli factory belonging to a multinational and he cannot keep us, and yet he travels around the world looking for investors.”

In response to Birnbaum’s allegations, an official at the Economy Ministry (whose investments center is responsible for awarding capital-spending subsidies) said the proposal SodaStream had presented called for taking on only 125 extra staff in the first stage of its expansion and 375 later, not the 2,000 Birnbaum is now talking about. The official, who asked not to be identified, said the company had not met the terms of the aid.

“There’s a big gap between his whining and the reality,” said the official. “The company has received tens of millions of shekels in government grants since 1999. “It can make changes [in its capital-spending program] but only in coordination with the investments centers, which it didn’t do.”

The Lehavim facility is partly constructed, and most of the equipment and machinery it has purchased has been seconded to suppliers or installed at other SodaStream factories, the official contended. Yet the company is asking for more aid for the second stage of its expansion, the official said.

“We very much want SodaStream to be in Israel, but there are other companies that are eligible for grants and we need to operate under the terms of the law,” he said.

In Israel, SodaStream employs some 1,300 people at its Mishor Adumim facility, 300 more at its plant in Alon Tavor (in the Galilee), and 200 at a plant in Ashkelon.

In addition to its Israel operations, SodaStream has another 20 factories located around the world. Birnbaum said SodaStream is in negotiations with the states of South Carolina and New Mexico to move some of its production to either state.

SodaStream moved part of its syrup production operations to the United States last March as part of a strategic cooperation agreement with the Canadian company Cott Beverages. However, Birnbaum said the move to the United States was not based on financial considerations.

“I don’t have the strength to fight the bureaucracy,” he said. “In general, it’s hard to have industry [in Israel] because there is too much bureaucracy. I get the feeling that they don’t want me here, that they’re doing me a favor.”

Bloomberg
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