Did PepsiCo (NYSE:PEP) Save the Day for Soda Stream (NASDAQ:SODA)?

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By Martin Foley on October 28, 2014 Consumer Staples

Soda Stream (NASDAQ:SODA) is a very popular company that makes home carbonation product. The machine carbonates water by adding carbon dioxide from a pressure cylinder in order to make soda water. The company also sells over 100 flavored syrups to cater to consumer tastes and preferences. In 1998, the company merged with Soda Club and shifted focus to healthier drinks. The idea worked for a while, but according to latest news, it’s been a rough year for Soda Stream (NASDAQ:SODA). In October 2014, Soda Stream (NASDAQ:SODA) revealed that it hasn’t been a good year for the company, with sales stagnant and revenues dropping. This has resulted in a significant drop in the company’s share. Other negative impacts also took place due to company’s support of Israel in the latest Middle East conflict, which led to people rejecting the brand in many geographical regions. But a new ray of hope emerged on Friday for investors, when PepsiCo (NYSE:PEP) announced its plan to take Soda Stream (NASDAQ:SODA) for a spin. In other words, it’s going to test its flavors on Soda Stream (NASDAQ:SODA) machine. If all goes according to plan, customers will soon be able to produce Pepsi (NYSE:PEP) beverages at home.

This project will only be available in certain geographical locations and only for a limited time. The Pepsi (NYSE:PEP) flavors that will be available are Pepsi (NYSE:PEP) Homemade, Vanilla, Wild Cherry, Sierra Mist Homemade Cranberry, Sierra Mist Homemade and Sierra Mist Homemade Peach. The emphasis is on Homemade, as Pepsi (NYSE:PEP) plans to keep the bottler and retail distributions off this project.

This experiment might work in favor of Soda Stream (NASDAQ:SODA), as it has been well received in the European market, but has faced trouble in other areas. Attaching Pepsi (NYSE:PEP) brand name to it, might help it recover even if it means going a bit further away from its objective of healthy drinks and introducing frizzy drinks. At least, this will encourage people to invest in the machine and boast up sales in those regions.

This move is expected to work in Pepsi (NYSE:PEP)’s favor as it did for Coca cola (NYSE:KO) when it joined hands with Keurig Green Mountain (NASDAQ:GMCR) in the beginning of the year. Pepsi (NYSE:PEP) decided to take on this merger after seeing Coca cola (NYSE:KO)’s success into the home carbonation market. It did take up a similar deal with Malta Bevyz in spring time but that product is yet to enter the US market.

As consumers are becoming more and more health conscious; soda companies have suffered in general. Pepsi (NYSE:PEP) is hoping that use of good marketing might be able to bring consumers in once again by offering them a chance to produce naturally sweetened Coca Cola (NYSE:KO) and Pepsi (NYSE:PEP) drinks on their own. How successful this effort will be for Soda Stream (NASDAQ:SODA) and PepsiCo (NYSE:PEP) will be revealed in time. At this stage, the companies are more focused on giving the consumers, an opportunity to enjoy homemade frizzy drinks.