SodaStream to Move Factory From West Bank to Southern Israel

Palestinian activists had launched a campaign boycotting the company because of the factory located in an Israeli settlement in the West Bank.

The SodaStream plant in Mishor Adumim.
The SodaStream plant in Mishor Adumim.Credit: Bloomberg

SodaStream is shuttering its controversial West Bank plant next year as part of a plan to boost growth, the company said Wednesday.

The plant in the Ma’aleh Adumim industrial zone, which employs Palestinian workers, has made the at-home soda machine maker a target of the anti-Israel boycott, divestment and sanctions movement, and put the company at odds with European policies blocking the import of products made in West Bank settlements.

The company has said the factory improves relations between Israelis and Palestinians while offering Palestinians jobs. It has said it employs hundreds of Palestinians and gives them benefits equal to those granted to Israeli workers.

“We are working with the Israeli government to secure work permits for our Palestinian employees,” CEO Daniel Birnbaum said.

Also Wednesday, SodaStream cut its 2014 profit and revenue forecasts after reporting a sharp drop in third-quarter earnings and saying it would restructure to spur a return to growth. Sales of SodaStream’s soda machines have been weak in the United States as consumers in the company’s biggest market opt for healthier drinks such as juices and teas.

“Our third-quarter performance was pressured by challenging selling conditions for soda makers and flavors primarily in the U.S.,” Birnbaum said, adding that the performance outside the United States was mixed. Birnbaum announced a “comprehensive growth plan” meant to return SodaStream to profitable growth.

As part of that plan, the company would shut down and relocate operations from its Ma’aleh Adumin and Alon Tavor facilities to a new plant in the Negev. It would also discontinue certain beverage makers and flavors at a cost of about $20 million.

The financial impact of those two moves would be spread out from the fourth quarter into 2015. “We are fully committed to getting the company back on track,” Birnbaum said.

The company had previously mentioned that it was considering shutting the Ma’aleh Adumim plant for financial reasons while shifting more operations to the Negev factory.

“The considerations will be purely financial and do not include the European boycott on manufacturing in the territories,” Birnbaum told TheMarker in August.

“Nor [will they include] the various calls to boycott products of the company because of its location in Ma’aleh Adumim. The boycott is a nuisance but does not cause serious financial damage. We are not giving in to the boycott. We are Zionist.”

In July, SodaStream was reportedly in talks with an investment firm to be taken private in a deal valuing the company at $828 million.

The stock received a boost last week when SodaStream said that, in a limited test, it would sell certain PepsiCo brands such as Pepsi Homemade that are not sold in stores.

SodaStream’s third-quarter revenues came in at $125.9 million, down from $144.6 million a year earlier. Net profit fell to $9.5 million from $16.4 million.

The company lowered its forecast for all of 2014, saying revenues were expected to decrease about 9% from the $562.7 million tallied in 2013, while profits were expected to drop about 42% from $42 million. Previously the company had forecast a 5 percent drop in both revenues and profits.

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