SodaStream International Ltd (NASDAQ:SODA), the Israel-based company and the manufacturer of the home soda maker that transforms water into soft drinks and sparkling water, has been recently marked as a potential takeover candidate.
The stock recently surged to its highest price since 2011 after reports in the Israeli media that PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) are both engaged in talks with SodaStream International Ltd (NASDAQ:SODA). However, according to Bloomberg, Pepsi and The Coca-Cola Company (NYSE:KO) denied the rumors, while PepsiCo, Inc. (NYSE:PEP) CEO Indra Nooyi claimed that it was the first time she had heard about the talks. SodaStream International Ltd (NASDAQ:SODA) said it does not comment on speculation and rumors.
Assuming the rumors are right, it makes the company a strong buy and a strong candidate to add to your portfolio.
The rise of SodaStream
The company traces its origins back to a British firm founded in 1903. SodaStream International Ltd (NASDAQ:SODA) machines were popular during the 1970s and 1980s, and are associated with Generation X. The tiny company changed ownerships at a high pace during the past couple of decades until it was eventually acquired by an Israeli company and finally hit the golden road at the beginning of the decade with an impressive IPO.
The company is now a leading manufacturer of home beverage-carbonation systems sold at major retailers in 45 countries used by over 6 million households. Moreover, the company is only in its early stages of global expansion, and is aggressively attempting to penetrate the lucrative U.S. market, where it estimates to have reached a 1% household penetration level.
Last year was a phenomenal year. Sales reached 1 million units in the fourth quarter, the highest in the company’s history. SodaStream International Ltd (NASDAQ:SODA) is pushing aggressively to expand in the U.S. and the numbers are impressive: Revenue growth was highest in the Americas with a 95% year-over-year rise in the fourth quarter. SodaStream International Ltd (NASDAQ:SODA) also won in Western Europe and Asia with about a 30% increase in sales year over year.
CEO Daniel Birnbaum said that in the most conservative estimates, the company is aiming to reach a 25% penetration rate in Europe by next year. He also said he’d rather under-promise and over-deliver rather than over-promise and under-deliver.
SodaStream becomes a problem for Coke and Pepsi
With less than 1% share of the global carbonated beverage market, the company poses a significant threat to rivals such as Coke and Pepsi. SodaStream is trying to change the way we consume soda. Although it is competing against big players like Coke, Pepsi and Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), the company has many advantages over the old soda giants. The folks at Coca Cola and PepsiCo should be worried about the rise of SodaStream and its long-term effect on consumer preferences.