Commentary

SodaStream Sours On 'Sweet'; Will Close West Bank Factory

SodaStream announced during an earnings call yesterday that it was pretty much ditching sweet soda and re-rebranding as a carbonated water company. It is also said it would close its controversial factory in the West Bank that led to a worldwide consumer boycott and caused spokeswoman Scarlett Johansson to resign in January as an ambassador for Oxfam after eight years with the group.

The latter announcement “is pleasant news for guilt-ridden liberals who also happen to be SodaStream fans, and (far more importantly) it's a small victory for Palestinians who would prefer not to live in an occupied territory,” writes Jordan Weissmann on Slate.

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The Israeli company also will be shutting a second factory and expanding its production in a new facility in Lehavim in Israel's southern Negev region. Spokeswoman Nirit Hurwitz said that the decision was for “purely commercial” reasons, the Irish Independentreports

“We are offering all employees the opportunity to join us in Lehavim, and specifically, we are working with the Israeli government to secure work permits for our Palestinian employees,” said SodaStream CEO Daniel Birnbaum during the earnings call, which he opened by reporting that “the third quarter fell well short of our expectations” with particularly “challenging” sales in the U.S. Overall, sales dropped 9%.

“The Palestinian boycott campaign welcomed the announced move, saying its boycott caused retailers to drop SodaStream,” reports Josh Gardner for the Daily Mail Online. But Ramah Kudaimi of the US Campaign to End the Israeli Occupation, “said that SodaStream would remain a target of boycott efforts since its factory is close to Rahat, a planned township in the Negev desert for Bedouins,” reports JTA, the “global Jewish new source.”

“Online calls to boycott the company’s products have more than doubled since 2013 and represented 29% of SodaStream’s brand conversations on the Internet between July and October, up from 10% a year ago, according to Networked Insights, a social-media analytics firm,” Mike Esterl points out in the Wall Street Journal.

But the company says that cost-savings, not the boycott, drove the decision to close the West Bank facility. The new factory, which will open by the end of 2015, is backed by a $20 million grant from the Israeli government and “will become our flagship manufacturing site and is expected to deliver operational excellence and result in savings of 2% across our entire cost base,” according to Hurwitz.

SodaStream also proclaimed “it would increasingly emphasize water, not soda, in its marketing to try to reverse falling sales as more health-conscious consumers back away from sugary drinks such as cola amid rising obesity and diabetes concerns,” Esterl writes.

“The idea of sweetened beverages with chemicals or sugar is very much out. This is a megatrend, not a fad,” Birnbaum told the WSJ’s Esterl in an interview.

“From now on, SodaStream makes soda — as in club soda, not soda as in pop,” observesBloomberg Businessweek’s Vanessa Wong, citing Birnbaum’s declaration during yesterday’s call: “We will never have a cola that is better than Coca-Cola or Pepsi Cola. I will say that loud and clear. That is not where we come from and that’s not where we’re going.”  

“The company is even making a subtle change in the logo to distance itself from soda,” Wong points out. “And its slogan, ‘Set the bubbles free,’ is being replaced by the less soda-focused ‘Water made exciting.’”

Both PepsiCo and Coca-Cola, among others, have been mentioned as potentially acquiring the company, of course. But “some analysts have said a collaboration would make more sense than a full acquisition,” writesFortune’s John Kell. 

Last week, that’s precisely what happened when SodaStream revealed “plans to test out make-your-own versions of products,” Carl O’Donnell reported in Forbes, that “will feature beverages geared towards health-conscious buyers, including naturally sweetened Pepsi Homemade and Sierra Mist Homemade with 50-60 calories per 8 oz. serving. The 10-week trial will launch in the next few weeks in Orlando and Tampa, according to Pepsi.”

The “exploratory new venture” follows an agreement made between Coca-Cola and Keurig Green Mountain earlier this year to market a rival product called Keurig Cold, bringing the “soda wars to the home front,” as we reported at the time.

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