Dive Brief:
- SodaStream's stock price soared 24% by market close on Tuesday after the release of the company's earnings report. The results reflected its progress since rebranding with a focus on sparkling water rather than just soda.
- Revenue increased 10.4% to $100.9 million, which blew past analysts' predictions of $89 million. The total was driven by a 15% sales jump in Western Europe, its largest market, and stabilized sales in North America after two years of consistent declines.
- Volumes of sparkling water starter kits were up 11%, carbon-dioxide refills up 12%, and flavored syrup volumes up 7%.
Dive Insight:
SodaStream's rebranding as a sparkling water company began in mid-2015, but the company is now feeling the impact more acutely as of this latest quarter. In the prior quarter (Q4 2015), SodaStream looked ready for a turnaround, but revenue hadn't yet recovered, with an 11% decrease.
But even as revenues bounce back, SodaStream still struggles with profitability. Profits were about flat in the first quarter, hovering around $6 million. That was an improvement over $2.8 million in profits in the fourth quarter (which was compared to an $8.2 million loss the year before) and a 76% plunge in profits in the third quarter. Gross margins decreased in the latest quarter, which the company attributed to currency headwinds, and sales and marketing expenses increased to support the rebranding.
Now that SodaStream has made headway in Europe, the company can bring its focus back to spurring growth in North America. Its soda business fizzled in the region in recent years as more consumers turned away from soda, both RTD and made at home. But now that SodaStream fronts sparkling water as its main product, company sales could rise alongside increased consumption of sparkling water in the region.
But SodaStream can't hide from the product category included in the company name. It will take a concerted marketing and promotional effort to ignite sales in North America to the levels of Western Europe. This could impact profitability in the short term. But if SodaStream can make a statement about its new product and brand positioning that is heard — and accepted — by consumers, SodaStream may be able to overcome prior shortcomings.