Will SodaStream International (NASDAQ:SODA) Benefit From Its Partnership?

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By Ross Schwartz on December 17, 2014 Consumer Staples

There was a time when the chief executive officer of SodaStream International (NASDAQ:SODA) remarked that the flavors of Pepsi Co (NYSE:PEP) and Coca-Cola (NYSE:KO) are a trap. However, it looks like that SodaStream has gotten itself involved in that very trap. The company sealed a deal with Pepsi Co (NYSE:PEP) in the month of October, whereby, it will test some branded sodas under the name of Pepsi in two different markets.

SodaStream told the Beverage Industry that people have been coming in and trying their flavored soda since the time it announced partnership with Pepsi Co. According to the management of the at-home company, the response that people have been giving to these sodas is positive. The chief executive of Pepsi Co, on the other hand, does not share the same view. According to Indra Nooyi, people are definitely trying the new drink; however, they do not think that it tastes like Pepsi. The investors of SodaStream are worried since the time Indra Nooyi made that statement to Business Insider, for it does not bode well for SodaStream International (NASDAQ:SODA) when the partner of that very company makes differentiating, rather slamming comments.

What the investors of SodaStream (NASDAQ:SODA) are worried about is the fact that when the customers make at-home sodas and that soda reads ‘Pepsi,’ they expect the taste to be like Pepsi. The fact that customers are of the view that Pepsi and SodaStream’s at-home sodas are different can lead to a decline in sales.

The results of this experiment can also predict the future of Coca-Cola’s joint venture with Keurig Green Mountain, a coffee maker company. Both the companies are in a partnership whereby the coffee maker will design a cold beverage machine for Coca-Cola’s at home drinks.

SodaStream (NASDAQ:SODA) is facing trouble in making the customers return to their stores for another at-home Soda. The company saw a decline of 13 percent in its sales figures during the third quarter of the year 2014; and the sales of SodaStream’s new units declined by 32 percent when compared with the figures of the same quarter a year back. The beverage maker makes most of its profits from the consumable section; however, the sales in that segment are also going down.

Coming to the stock prices of SodaStream International (NASDAQ:SODA), the company, on the last trading day of December 16, 2014, started its stocks at a price of $20.35 and closed at a price of 20.40, after hitting the highest price of $21.09. The company has a total market capitalization of $427.52 million with a P/E (price to earnings) ratio of 15.56.

The stocks of Pepsi Co (NYSE:PEP), on the other hand, are being traded at a price of $93.54. The intraday range for the stocks, during the last trading session, has been recorded to be around $92.53 and $94.57. The company has a market capitalization of $139.94 billion with a P/E (price to earnings) ratio of 20.47.