By Carlo Versano
The sparkling water industry is a literal bubble market. But will it become a figurative one, too?
Pepsi execs just made a big bet that the thirst for healthier drinks will last: the company announced Monday it's buying Israel-based SodaStream for $3.2 billion in the latest efforts to guarantee continued relevance as younger customers spurn soda and junk food. But the purchase is more than a nod to calorie-conscious drinkers, said Saabira Chaudhuri, the Wall Street Journal reporter who broke the story of the merger.
"This lets Pepsi get ahead of this potential backlash against single-service plastic," she said Monday in an interview on Cheddar.
Pepsi is hedging against its core product line and yielding to consumers' mounting concerns about plastic waste. It's a major issue in Western Europe, where SodaStream does the bulk of its sales, Chaudhuri said.
SodaStream has risen in popularity over the last several years but actually a long history that dates back to 1903. After a private-equity reorganization, the company went public in 2010, positioning itself as a DIY soda maker, but saw an opportunity in the sparkling water market and rebranded itself as health-conscious and eco-friendly alternative to soda ー a right place, right time approach that paid off.
An acquisition by one of the largest consumer brands in the world will allow SodaStream to expand globally and accelerate its research and development, Chaudhuri said.
"To have a company with the heft of Pepsi get behind you ー that's an expansion that they wouldn't be able to do on their own anytime soon."
Chaudhuri also said the deal reminds her of Unilever's surprise purchase of Dollar Shave Club in 2016 for $1 billion in cash. Both moves speak to a corporate realization that consumers' habits are changing. In the case of Unilever, the company bought into the subscription model trend. With Pepsi, it's about the shift to healthier, natural food and drink.
In both instances, it's about paying for, "small things that they know are working and then try to scale them," Chaudhuri said.
Pepsi already made a play for a piece of the sparkling water market earlier this year with the launch of its Bubly line to tap into rival La Croix's cult following. But SodaStream, with its counter top product, flavorings, and refillable CO2 cartridges, is something new.
"This is a completely different model for them," Chaudhuri said.
For full interview, click here.