Earlier this month, around the time of the Super Bowl, a minor controversy erupted around SodaStream, the make-your-own-soda company. SodaStream sells countertop soda makers powered by small tanks of compressed air. The cheapest machine costs around eighty dollars. You fill a small bottle with tap water and attach it to your SodaStream; when you push a button, air is injected into the bottle, creating sparkling water. Afterward, by adding flavored syrups, you can make your own soda at home. The company sells dozens of different ?SodaMixes,? with pleasingly generic names like Diet Cola, Dr. Pete, and Energy, but you can also make your own syrups. The instructions caution you not to carbonate anything other than water (like, say, margaritas). The Internet, though, overflows with blog posts written by people who have ?gone rogue? with their SodaStreams and, for example, carbonated white wine to make ?champagne.?
The controversy, such as it was, revolved around an ad that SodaStream wanted to run during the Super Bowl. The ad the company proposed to CBS showed two delivery trucks, one from Coke and another from Pepsi, converging on a supermarket. While the banjo tune from ?Deliverance? jangles in the background, the two drivers load up their dollies with soda and race toward the store?s entrance. As they near the sliding doors, Pepsi?s man starts to pull ahead?but then, all of a sudden and for no discernible reason, his soda bottles disappear, his soda splashing everywhere. We cut to a Christian Bale-like man standing alone in a darkened kitchen and forcefully working the button of his SodaStream. ?With SodaStream,? a voice intones, ?we could?ve saved five hundred million bottles on game day alone.? Coke and Pepsi, the ad implies, are environmentally irresponsible dinosaurs. SodaStream is the D.I.Y. soda system of the future.
It?s basically a harmless ad, but CBS, which regularly meddles with its Super Bowl commercials, rejected it. Many people assumed that the network didn?t want to offend Coke and Pepsi, who are two of its biggest advertisers. (CBS hasn?t issued an explanation for its decision.) In any case, having its ad banned was actually a big win for SodaStream. Breathless journalists wrote about CBS?s favoritism; millions saw a different SodaStream ad, in which generically labeled soda bottles explode; and millions more have gone to SodaStream?s Web site, where the original ad is featured under a banner urging them to ?watch the SodaStream commercial they wouldn?t let you see during the big game.? (It?s entirely possible that SodaStream welcomed the rejection: the ad they ended up showing at the Super Bowl had itself been banned in the U.K., presumably for similar reasons, and the company had reaped a P.R. reward there, too.) Coke and Pepsi, who normally loom invincible and eternal, seemed skittish and afraid.
SodaStream is a relative upstart here in the United States, but it?s actually an old company?a version of the appliance was invented in 1903?and in other countries it?s been waging a campaign against Coke and Pepsi for decades. In the seventies and eighties, SodaStream was popular in England and Australia, where its jingle urged people to ?Get busy with the fizzy.? (The band Garbage, whose singer, Shirley Manson, is from Scotland, has written a song called ?Get Bizzy with the Fizzy,? and there?s another, very tuneful, Australian band called SodaStream?they sound a little like the Go-Betweens, or Belle and Sebastian.) In the eighties, of course, the environmental aspect of SodaStream?s business didn?t have the force it does now; that angle has given the company a new raison d?etre, and makes it a more dangerous competitor. SodaStream went public on the Nasdaq in 2010, and that has allowed for expansion in the U.S. and elsewhere; the company says that in Sweden twenty per cent of households own a SodaStream. According to Forbes, in 2007, SodaStream had U.S. sales of just four million dollars. But by 2011, the company had made distribution deals with retailers like Walmart and Bed Bath & Beyond, and U.S. sales had grown by a factor of ten, to forty million. Needless to say, they?ve only continued to grow since then; America is now SodaStream?s largest market. And since November, 2010, the company?s stock has grown more than Coca-Cola and PepsiCo?s, as you can see in this chart (click on the image to expand):
The company?s ?razor and blade? (or ?printer and ink?) business model is a classic: once you buy a SodaStream, you?re hooked on its proprietary air tanks and SodaMixes. This month, SodaStream announced that it was integrating its technology into a refrigerator manufactured by Samsung. And SodaStream sodas taste good. I?m an experienced Diet Coke drinker, and I like SodaStream?s Diet Cola better. People who own SodaStreams love them.
These are all points in SodaStream?s favor, and even moderate success in the huge U.S. market will be a boon for the company. But there are plenty of reasons to be skeptical, too. People seem to drink more sparkling water in Europe than they do in the United States, which might make it hard to replicate Sweden-level growth here. Europeans may be more environmentally conscious than Americans. And the truth is that SodaStream is a pain. At first, the machine looks like a close cousin to the coffee-in-a-pod machines that are ubiquitous in offices and kitchens. That seems to bode well for SodaStream. But the popularity of those machines actually suggests SodaStream?s limitations. Decent coffee, which Americans have grown used to drinking at Starbucks, can be hard to brew; a pod-based coffee machine makes it easily and without hassle. SodaStream does just the opposite. Its soda isn?t fundamentally better than pre-bottled soda. And making it at home is actually kind of complicated. You have to wash out the machine?s reusable bottle; you have to re-order soda-mixes, or make your own; and, most problematically, you have to exchange your used compressed air cannisters for new ones when, inevitably, they run out. (SodaStream, to its credit, makes this as easy as possible: you can make the exchange at any number of retail stores, like Target and Crate & Barrel.) For most people, it?s only worth it if you drink incredible quantities of soda or sparkling water, or if you?re a soda mad scientist, addicted to experimentation. All of this makes it hard to imagine SodaStream as a true competitor to Coke and Pepsi, from a sales point of view.
Still, even without becoming massively successful, SodaStream could pose a significant threat to Coke and Pepsi. Selling soda is a weird business. It?s dependent, to an unusual extent, upon mythology and emotion. Right now, people are fanatically loyal to their soda brands; they have emotional connections with soda that far exceed the inherent qualities of the soda itself. (?I had my first kiss while I had a bottle of Coke in my hand,? Charlotte Beers, a C.E.O. of Ogilvy and Mather, once said. ?Coca-Cola isn?t about taste; it?s about my life.?) That?s why competition in the soda business has centered so often on advertising and distribution, and so rarely on cost competition or on innovation in the product itself. Coke and Pepsi can?t compete on price, because that might reveal what a hum-drum commodity soda really is (think of down-market soda brands, like Diet-Rite); they can?t introduce too many new sodas, because that might suggest, unthinkably, that our soda preferences could be more ecumenical than they usually are. Their main priority is the preservation of the aura, which, however improbably, hovers around Coke and Pepsi.
From this point of view, the absolute worst thing Coke and Pepsi could do would be to sell their syrup directly to consumers. Doing that would pull back the curtain on the whole soda enterprise. And yet, that?s exactly what SodaStream is doing, in a way that?s particularly unflattering to the big, high-end soda companies. The company?s business revolves around honesty about the industrial sameness of all sodas. The syrup you order from SodaStream doesn?t come in some artisanal Mason jar; it?s packaged in a compact plastic bottle that disconcertingly resembles a bottle of laundry detergent. To measure out the right amount of syrup, you pour it into the bottle cap, then pour from the cap into your sparkling water. Watching the syrup swirl around in the bubbles, you think, That?s it?that?s what soda really is. The problem for Coke and Pepsi isn?t that SodaStream cuts into sales. It?s that SodaStream demystifies soda. Coke and Pepsi have spent a century teaching us to have feelings about our sodas. SodaStream shows us what those feelings are really made of.
Source: http://www.newyorker.com/online/blogs/newsdesk/2013/02/should-coke-and-pepsi-be-worried-about-sodastream.html
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