SodaStream Shares Rally on News of PepsiCo Collaboration

Israeli soda-machine maker will be selling some PepsiCo brands in limited test in United States. Shares ended up 15% on Friday.

Bloomberg

Shares of SodaStream International surged on the Nasdaq exchange on Friday after the at-home soda-machine maker said it would sell some PepsiCo brands in a limited test in the United States.

The 10-week trial will begin in a few weeks at Walmart stores and Bed Bath & Beyond in Orlando and Tampa, Florida, the trade publication Beverage Digest reported. The brands in the test, Pepsi Homemade and Sierra Mist Homemade, are sweetened with sugar and stevia, and not sold in stores, it added. A Pepsi spokesman confirmed the arrangement with SodaStream, whose headquarters is at Airport City, near Ben-Gurion International Airport.

SodaStream shares surged as much as 24% in trading on Friday, and closed up 15.4% for the day at $24.45 per share. Pepsi shares rose by 0.9% to $94.60.

“At-home, make-your-own beverages represent an emerging category that has generated interest among some consumers,” Pepsi said in a statement. “PepsiCo is exploring multiple technologies in this space. SodaStream is one of several companies we’re talking to about potential ideas.”

SodaStream is not in talks with Pepsi for a broader agreement, the Israeli company said in a regulatory filing on Friday.

The Wall Street Journal noted that SodaStream’s link-up with Pepsi comes as Pepsi rival Coca-Cola prepares to sell carbonated beverages by next year in a cold-drink countertop machine being developed by Keurig Green Mountain. That move could present new competition for SodaStream. Coke has a minority stake in Keurig, which it acquired earlier this year. “The experiments with home-carbonation machines come as beverage companies try to halt a decade-long decline in U.S. soda sales,” the Wall Street Journal noted.

For his part, Carl O’Donnell of Forbes noted that SodaStream sales have dropped sharply over the past year, adding that, on October 7, the company warned of a slump in third-quarter revenues. The news of the collaboration with Pepsi did not boost SodaStream’s stock price to the levels at which its stock was trading before the sales warning, O’Donnell noted.

“It’s possible that joining forces with a global brand like Pepsi could ignite SodaStream’s growth prospects, in much the same way as Keurig coffee makers took off after the company struck a deal with Starbucks,” Forbes quoted Morningstar analyst Adam Fleck as saying. “If SodaStream’s sales were to spike, the machines could become a more powerful distribution system for Pepsi’s products,” he added.