Green Mountain implodes as SodaStream soars

The soda maker keeps short sellers at bay for now.

By Jonathan Berr May 9, 2012 11:12AM

Green Mountain Coffee Roasters (GMCR), whose Keurig single-serve coffee makers have become ubiquitous in U.S. homes and offices, has imploded in recent days. The company has admitted that its growth is slowing and announced that it replaced its chairman and lead director because margins calls forced them to sell shares in violation of company policy.

And fears that SodaStream International (SODA) will be the next to melt down have been allayed -- at least for now.

SodaStream, based in Airport City, Israel, on Wednesday reported better-than-expected quarterly results. Net income at the maker of the trendy soda machines rose 84.3% to $10.1 million, or 48 cents, versus $5.5 million, or 28 cents, a year earlier. Revenue surged 50.2% to $87.9 million. Excluding one-time items, profit was 55 cents, beating Wall Street analysts' expectations for earnings of 35 cents on revenue of $56.82 million.

Shares of SodaStream, which have plunged more than 12% over the past month, surged in early trading as the company announced that it has begun shipping products to Wal-Mart (WMT). The company also raised its 2012 guidance. SodaStream expects revenue to rise 33% versus a 28% gain in an earlier forecast. Net income is expected to surge 50% over 2011, compared with its previous guidance of a 42% gain.

"We are committed to maintaining financial discipline to generate greater earnings power and return increased value to our shareholders over the longer term," CEO Daniel Birnbaum said in a press release.

The company reported double-digit gains across most geographies. Sales in the Americas in the three months ended March 31 surged 93% to $25.6 million and rose 50% to $45.7 million in Western Europe. Asia-Pacific revenue was $9.9 million, a 110% gain, while Central & Eastern Europe, Middle East, Africa saw sales of $6.7 million, down 33%.

Like Green Mountain, SodaStream is a favorite target of short sellers, who bet that stocks will fall. As of April 13, more than 12 million shares were held short. Though they were getting crushed Wednesday, short sellers are going to be back when the shares fall again, which is bound to happen.

SodaStream has many factors going against it. For one, people don't drink as much soda as they have in years past, a fact that backers of taxes on sugary sodas often neglect to mention. In fact, Beverage Digest estimates Americans drank an average of 44.6 gallons of carbonated soft drinks last year, the lowest level since 1987.

As the summer holiday season approaches, SodaStream's margins will be pressured as retailers demand the company slash prices since Green Mountain will be doing the same.

Very few companies are able to transform themselves from a fad to a bona fide consumer trend. SodaStream will be no different.

Jonathan Berr does not own shares of the companies listed here. Follow him on Twitter@jdberr.

May 9, 2012 11:41AM
Clueless.  Comparing GMCR to SODA shows you have done 0 due diligence.  GMCR K-Cups are more expensive than regular coffee, create more waste, and have expiring patents.  SODA is cheaper than various branded sodas and healthier, creates less waste, and makes nice profits on its flavors and CO2 cartridges.  A 15L flavor bottle of their diet redbull knockoff cost me 5.40+tax in NYC.  That is more than 1 24oz redbull at Duane Reade.  That alone pays for my Sodastream.  You don't get any savings with Kcups.
May 9, 2012 3:28PM
The article is opinionated as it presents personal opinions as facts -- for instance, it claims that people consume less carbonated drinks -- true to the point of $KO's and $PEP's of the world -- the very reason behind this decrease is that they are unhealthy, exactly the opposite to $SODA is doing, which uses naturally sugarless Stevia flavors. 
The other claim made in the article is that the margins are bound to be squeezed -- the only reason $GMCR margins are being squeezed is because they are ubiquitous and their market is saturated. $SODA is on the opposite side of the equation here and with summer approaching people will be looking at more savory ways to quench their thirst -- here's exactly where this product comes in -- for me personally, paying $1.50 (that is discounted already) for a bottle of Perrier is an insult, I'd rather do my own drink and spare myself a trip to the grocery store together with their lines.
The idea was well implemented in the past with the siphons and replaceable little gas capsules, but then forgotten and abandoned without second thought -- as it typically happens a lot of new ideas are just well-forgotten old ones.
This idea actually got new life as we started thinking healthier products and more responsible environmental behaviors.
May 9, 2012 12:48PM
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