SodaStream Case

Your final write­up should take the form of a business report that includes an executive summary, analysis section, alternative(s) identification, and recommendation(s). Your executive summary should be no more than 2 pages and the analysis, alternatives and recommendation sections should not exceed 8 pages. Your report can be less than 10 pages, but the maximum length of your write­up is 10 pages, not including a cover page and illustrations. You may add as many charts, graphs or illustrations as you need to reinforce your analysis. 1. Please use a font size of 11 or 12. Also, submit your case as a Word document not a PDF. This is easier for me to make comments on your case.

EXECUTIVE SUMMARY​
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SodaStream, a manufacturer of home carbonation machines that allows consumers to make their own bubbly beverages, may hold the key in disrupting industry giants like Coca­Cola and PepsiCo. Their instant beverage device combines tap water, flavored syrup, and carbon
dioxide gas in a reusable bottle that’s threatening industry leaders. ​ Although at­home soda production

began in 1903, SodaStream machines did not begin to sell their product across Europe until the 1920s. Moreover, it wasn’t until the company went public on the NASDAQ in 2010 that SodaStream began to get a following in the United States. Just a year after SodaStream went public, the Israeli company’s market cap rose from $367 million to $1.46 billion. That same year, SodaStream had products placed in 45,000 stores globally, including 7,000 retail locations in the United States. The bubbly beverage­maker is now in retail giants including Costco, Wal­Mart, Target, and Bed Bath & Beyond, among others. ​

(Levy, 2014)
SodaStream offers a wide variety of features that give this product​ a serious competitive edge  compared to other carbonated beverages. It’s considerably cheaper than buying pre­packaged soda and can lead to saving the consumer nearly 70 cents percent per liter. Secondly, SodaStream is a healthier option SodaStream has 65 percent fewer calories per 8oz. than name­brand sodas, with SodaStream at 35 calories per 8 oz. vs. name­brand sodas at 100 calories per 8 oz. Another advantage is that the product helps reduce the consumption of plastic bottles, aluminum cans, and glass bottles since it leaves virtually no waste behind, helping to decrease the annual 28 billion bottles and jars Americans throw away. ​

(Levy, 2014)
SodaStream has been able to keep high profit margins in the last few year but “missed its mark in  2014.” The company has been faced with falling stock prices, and the reality of waning customers looking for better water, not soda. SodaStream is also facing retaliation of its biggest rival, Coke, as they plan to introduce a new Keurig soda machine of their own. Now the competitive advantage they’ve had is in danger of moving into competitive parity. The entire CSD industry has to evolve and keep up with the downhill trend of consumption. So naturally SodaStream has to change their strategy to keep their competitive advantage on the market. The company should look at partnering with PepsiCo to go up against Coke, and Dr. Pepper’s new deals with Keurig. ​

If SodaStream could offer products of one of the big three CSD names, hopefully they will gain the consumers already loyal to the big brand. As discussed in this analysis of the CSD industry and SodaStream, the entire future of the company lies within their decision on how to change their strategy and continue to be the largest in home carbonated beverage maker.

SODASTREAM SYSTEM
Company Overview:​
Founded in 1903 by W&A Gibley who marketed the original machines to British upper­class(PC 1­2). Now a growing trend being consumed all across the U.S. as well as Western Europe, Central Europe, the Middle East, Asia, the Pacific, and Africa.

SodaStream is making the beverage industry more convenient for their customers by not having to purchase and store bottles and cans. They are all  about empowering consumers by giving them the control of creating a beverage to their specific tastes. SodaStream provides customers a more cost effective alternative to consume beverages. Providing healthier products with less sugar, carbs, and calories than other soft drinks is how SodaStream is promoting health and wellness awareness to consumers. The company is also pushing for customers to go green, by using one SodaStream bottle a person can replace around 10,000 plastic bottles that are thrown away daily. Business strategy: ​

SodaStream’s main vision is to eliminate plastic bottles from landfills for good (PC 1­6). The company has taken notice to consumer worries about health and the change in demand from colas to “flavors” (PC 1­6). They stress the cost benefits to consumers in investing in the SodaStream machine.

The machines range in cost of $80­$200 and customers earn a return on that investment by eliminating the cost they would normally be spending each month on bottled or canned beverages. SodaStream is currently working on gaining more partnerships by increasing their consumer reach, enhancing category credibility, and growing the sales of soda makers and consumables. Sodastream sought out partnerships with beverage brands such as Country Time and Crystal Light. Also forged a relationship with Samsung to create a line of refrigerators containing sodastream machines built­in. Companies in the U.S. are working more at marketing strategies to make SodaStream more mainstream. In three years their marketing efforts have produced 40% of unaided brand awareness. The company has their very own celebrity global ambassador, Scarlett Johansson, who has been a consumer for 5 years. As of their 2014 guidance update they were expecting their 2014 revenue to increase by 15%, EBITDA to increase by 11%, and a net income increase of 3%.

****ASHLEY­ PLEASE ADD REFERENCES AS TO WHERE EACH PIECE OF INFO CAME FROM UNDER BUSINESS STRATEGY.

To look for changing trends such as: increased interest in “green” products, health concerns, and society’s changing attitude towards frugality. ​ “​
Revolutionize the beverage industry ­ empowering people with simple, creative, fun ways to make and enjoy better­for­you, bottle­free bubbly beverages.” Goals for 2015: 1) New packaging and consumer message. 2) Operational improvements alongside and increase in manufacturing capacity. 3) Streamline distribution lines.
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What is the structure of the US carbonated soft drink market? As of 2011, 66% of the carbonated soft drink (CSD) market was dominated by Coca­Cola, PepsiCo, and Dr. Pepper Snapple Group. These three groups held the top 10 brand names, as well as a large portion of the market share. Coca­Cola and Pepsi have been in strong competition for many decades. Dr. Pepper Snapple Group chose to take hold of the flavor segment of the market instead of going head­to­head with the other two in the so called “cola wars.”

I think we should add something about it being a “mature industry” or even “de clining industry” (pg 51­52)

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How has the structure of the industry changed in recent years?

For the last decade, consumers have become more concerned about issues relating to their health and the environment more so than they had in the past. This brings several issues into play for the CSD industry. For one, many of the sodas are packed full of sugar and empty calories. Obesity is a major concern nationwide and the statistics are staggering for both children and adults. “​

Adult obesity rates have doubled since 1980,  from 15 to 30 percent, while childhood obesity rates have more than tripled” (TFAH, 2015).​
Another health concern is diabetes, again from the high sugar content in most of these sodas. “​ The Container Recycling Institute (CRI) estimates that 36 billion aluminum cans were landfilled” (U.S. Environmental Protection Agency).​ ​Also mentioned in 1­6 about the rise in prices leading to a decline in consumption of CSD.
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What do the changes in industry structure suggest about the likely profitability of the industry in the future?
Even though profits have been slowly declining over the last several years due to dwindling consumption, carbonated soft drinks still account for about 25% of beverage consumption daily for most Americans (Barney & Hesterly, 2015). In addition, the three leading CSD companies have invested in other popular drinks such as flavored waters, sports drinks, juices, tea, and coffee. This not only helps maintain profits, but also keeps them in competitive positions. ​

The company has solidified itself as the #1
sparkling beverage maker company in the world and in the consumer’s eyes. Additionally, the company has managed this feat of strength in a profitable way and with strong profit margins.
Firm’s performance: ​
Sales were up from $41 mil in 2010 to $158 mil in 2012. (PC 1­7 textbook).

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Is SodaStream a disruptive innovator of the carbonated soft drink industry? Bulls do feel like Sodastream will make traditional sodas obsolete. Bears feel like there are still problems regarding the ease of entry for competitors. ​ A prime example would be SodaStream’s newest competition, the ​ Keurig Green Mountain at­home soda  machine​. According to SodaStream’s CEO Daniel Birnbaum, they missed the mark in 2014 because consumers were looking for better water, not better soda (Cohen, 2015). Because the company failed to pinpoint this demand, “​ its stock on Nasdaq has fallen almost

60% since last April, when it hit a high for 2014 of $47.30, and is now trading at $19.90” (Cohen, 2015).
http://www.mediapost.com/publications/article/182491/disruptive­innovation­will­sodastream­d o­to­soft.html

Competitors: ​
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Coca­Cola, PepsiCo, Dr. Pepper Snapple group
Resources in value chain and how do they compare in cost and differentiation: Competitive advantage; is it sustainable or temporary: ​ Based on the current falling stock prices, I would have to say that their advantage was only temporary (see VRIO), but now looks like they have moved into competitive parity​ (note* might be a good graph to include that defines the economic value of each company to support)​ unless 2015 strategy shifts give them an advantage. Has gained some name recognition, but is not protected with patents. Coca­Cola is introducing a Keurig at­home dispenser that should be major competition. ​

Check out slide 30 in chapter 3. It discusses how being a second mover doesn’t mean that a firm will end up in competitive parity. Because Coke has such a big market share, They will be able to produce a product of a superior quality with a much lower price. ​

​When Coca­Cola releases it’s Keurig version this year that people may choose Coke because of the big name alone. ​ One major disadvantage is SodaStreams inability to sell fountain products and packaged products. According to the text, “fountain drinks generated about 25 percent of industry sales” (PC 1­4)