Water Wars: SodaStream's Offensive into the American Beverage Market

Zach Brooke
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Key Takeaways

What? Zeitgeist-y beverage maker SodaStream is the toast of Europe right now thanks to a new eco-consc​ious, sparkling water strategy pushed by CEO Daniel Birnbaum that he hopes to replicate in America.

So what? SodaStream's resurgence is somewhat surprising considering that until recently the 100-year-old brand was regarded as a relic from another era.

Now what? Follow trends in your category to make adjustments that keep your brand essential to trendy consumers. Consider addressing your adversaries head-on for extra buzz. 

Aug 1, 2017

Americans are prone to raise a glass of bubbly as of late. Not champagne, but sparkling water.

Numbers from the Beverage Marketing Corporation show that domestic consumption of sparkling water has more than doubled in the past five years. Whereas Americans drank a scant 232 million gallons of fizzy aqua in 2011, by year end 2016 the country had guzzled 574 million gallons. A recent report from Technavio predicts the global sparkling water market will post an average annual growth rate of 3% from 2016 to 2020.

In a bit of chicken-and-egg symbiosis, the demand for carbonated water is being matched by widespread availability of new channels and delivery systems. Whether up for grabs in the office fridge, extended eagerly to shoppers by a high-end clothier or invading supermarket endcaps and checkout lines, sparkling water is everywhere. Committed drinkers can actually forgo bottles altogether by purchasing a home carbonation system, more likely than not a SodaStream. Yet, even though this product seems tailor-made for the sparkling water zeitgeist and appears to have materialized on American retail shelves overnight, it’s actually a freshly reinvigorated brand with a 100-year history.

SodaStream’s lineage can be traced back to Edwardian Era England, when London distiller Guy Hugh Gilbey invented a device for aerating liquids that his upper-class customers used to carbonate their gin cocktails. The original 1914 patent describes a bulky contraption, replete with valves, pistons and plungers. Two decades later, the earliest flavored concentrates were introduced, which could be mixed with carbonated water to create instant soda. It wasn’t until 1955 that the home version of the SodaStream became available for the masses. Twenty years later, the brand reached its first golden age when it become a familiar fixture in European kitchens with a catchy tagline to match: Get Busy With the Fizzy.

Though nobody knew it at the time, the second half of the 1980s marked the start of a decline in fortunes for the company. In 1985, SodaStream was purchased by British food and drink conglomerate Cadbury Schweppes, which promptly deemphasized the brand in favor of its titular Schweppes beverages, according to current SodaStream CEO Daniel Birnbaum. By 1998, SodaStream had all but officially fallen out of fashion when it was purchased by an Israeli company and renamed Soda-Club. There, it languished until the next set of investors came over to kick the tires in 2007.

“At the time, I was running Nike in Israel,” Birnbaum says. “I got a call from a business school friend of mine. His name was Yuval Cohen. He said, ‘Daniel, do me a favor. Come for a couple of hours to participate in due diligence for a company I’m looking to acquire.’ ”

Cohen was reluctant to identify the company over the phone, but Birnbaum refused to come unless he was given the name. Cohen acquiesced.

“He told me it was SodaStream, and I almost fell off my chair,” Birnbaum says. It didn’t make sense. Cohen was a techie, more interested in investing in the future than attempting to rekindle nostalgia for a dead brand. “SodaStream was such an old rusty company. It was like the Volkswagen Beetle before it came back,” Birnbaum says.

Still, Birnbaum went. “The next day I found myself in a conference room of this company, and I was hearing all the excuses in the world [about] why not to enter this market and that market, why there’s no product development and why there’s no marketing department. It was run like a factory. Sales were declining, and they were losing money,” Birnbaum says. “Three weeks later, Yuval buys the company and says, ‘I want you to run it.’ ”

Carrying the Water

Today SodaStream is ascendant. It’s sold 3 million units in the last 12 months and posted growth for the past five quarters that’s averaged 14% at the topline and triple digits on the bottom line. Germany is the company’s largest market; by the end of 2016 sales there grew by double digits for 19 straight quarters while only reaching 7% of households, suggesting a lot of room for continued improvement. In Sweden, the numbers are more firm: One in four Swedish households owns a SodaStream.

The brand owes its European resurgence to savvy marketing that emphasizes a combination of convenience, value and environmentalism. There, SodaStream is billed as the solution to lugging home heavy bottles of water from the store every week while reducing the environmental impact of water consumption and saving consumers money.

“It’s not a nostalgic brand. It’s a modern brand. SodaStream realized that people in Europe consume gallons and gallons of sparkling water,” says Eli Peer, partner at Allenby Concept House, which was just named SodaStream’s agency of record after years of producing work for the brand. “It’s a beautiful machine that looks good on the countertop. It can be next to your espresso with pride.”

On the Bubble

Through it all, however, the U.S. has proved a tougher nut to crack. Even today, Birnbaum says, only 1.25% of U.S. households own a SodaStream. While Peer and Birnbaum are adamant that SodaStream’s sales in Europe are based on today’s needs and not yesterday’s affinity, there’s no denying the lengthy history of the brand in the European market has at least familiarized consumers with the concept of home carbonation. For much of the period Europe was getting busy with the fizzy, there was no analogous home beverage maker in America.

“In the United States, they needed to invent two categories that were nonexistent. One was a do-it-yourself sparkling beverage system,” Peer says. “Another was sparkling water because people [in the U.S.] didn’t drink sparkling water, they drink seltzer. Seltzer was an old people drink, or it was added in bars to vodka or gin.”

One of Birnbaum’s first strategies as CEO was to push into the U.S. He quickly reached agreements with high-end retailers such as Crate & Barrel and Williams Sonoma to stock the beverage makers. After the company went public on the Nasdaq exchange in 2010, the machines became nearly ubiquitous: Shoppers could find the beverage makers at Walmart and Target. Five years later, Birnbaum would call that move a mistakeduring a conference call with investors following a quarter that saw company revenue decline by more than 22%.

“I thought early on that I [could] access the mass market out of the gate and that we [could] go very quickly to places like Sears, Kmart, Walmart, but really that doesn’t work that way,” he said at the time.

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Water Works

Birnbaum’s mea culpa came at nearly the exact time the company began to reverse its fortunes by tying the brand to the increasing popularity of sparkling water. Previously, the reason Americans bought a SodaStream was for ... soda. Pop enthusiasts were encouraged to try the brand’s flavored concentrates it sold separately or experiment with their own unusual flavors. The company struck a deal with Pepsi and Ocean Spray midway through Birnbaum’s tenure to co-market soda and juice flavors that could be made in the home device.

That all changed after the bad performance in 2014 and 2015, which coincided with a larger and ongoing dip in soda sales overall. Birnbaum and company saw a life preserver in sparkling water and grabbed hold with full force.

“Sixty percent of sparkling water drinkers don’t realize SodaStream can make sparkling water, and [they] only know it as a machine for making cola or juice,” then-managing director Fiona Hope told Marketing Week in 2015. SodaStream, she said, “has a reasonably unhealthy and fizzy-flavored heritage, and we have an opportunity to reposition against the backdrop of sparkling water to make the brand more functional and youthful.”

Today, Birnbaum is proselytizing to anyone who will listen that SodaStream is an easier way for consumers to obtain carbonated water, a cheaper alternative to designer sparkling or still bottled water brands, and it might save the planet.

“Worldwide, there’s a billion and half disposable bottles and cans used every single day. The recycling rate of PET bottles is tiny—about 23%. By the way, recycling barely reduces the carbon footprint of a bottle by only 15%,” Birnbaum says. “Water in a bottle at home? It’s ridiculous and it’s criminal. Especially if your tap water is of high quality. In America, tap water is good.”

Green Light

It’s tough to say if the environmentalism angle will play in the U.S. Gary Hemphill, managing director and chief operating officer of research for the Beverage Marketing Corporation doesn’t think it will.

“Bottled water marketers have worked hard to make their products more environmentally friendly,” Hemphill says. “Bottles have been light-weighted as have been closures. Beyond that, sales continue to grow and are projected to grow in the years ahead. This doesn’t appear to be a significant issue for most consumers today.”

Even Peer and Birnbaum are upfront with the limitations of environmental messaging in the U.S. right now. “Americans … are not as green as the Europeans are. Americans consume more plastic. Americans don’t recycle as much,” Peer says.

“I don’t hear enough American consumers who care about the environment. It almost seems like Americans don’t give a crap,” adds Birnbaum.

But, if the recent advertising for the company is any indication, SodaStream is not shying away from eco-friendly messaging, just repackaging it. Last year, Allenby created “Shame or Glory,” which is probably SodaStream’s most memorable ad to date. It follows an average shopper as he is harangued while purchasing sparkling water at a supermarket. British actress Hannah Waddingham, reprising her Septa Unella character from HBO’s “Game of Thrones,” follows the man around the store ringing a bell and crying, “Shame!” in a parody of a famous scene from the show. The man leaves the 21st century store and walks into a medieval street market where he is pelted with produce by a populace inflamed over his purchase of allegedly wasteful plastic bottles. He ends his walk at a nearby film set where he delivers the bottles to another “Game of Thrones” actor, Icelandic bodybuilder Hafþór Björnsson, who chides the man further.

“Why are you stupid?” he asks. “Why are you carrying shameful plastic bottles? Don’t you know you’re hurting Mother Earth?”

Two and half minutes in, it transitions to Björnsson walking to a new set and speaking directly to the camera about the environmental, convenience and flavor benefits afforded by SodaStream.

In a two-part follow-up spot, Björnsson plays a pitchman not dissimilar from the Old Spice character in the long-running “The Man Your Man Could Smell Like” campaign. In it, he hawks a mock product called HeavyBubbles, sparkling water bottled in dumbbell-shaped containers weighing up to 10 kilos. The pitch is delivered nonchalantly amid surreal dramatics, such as walking through a glass door and witnessing a person rapidly dehydrating. Again, an abrupt switch to earnest pleas for SodaStream machines occurs late in the advertisement.

The gag products angle proved to be so popular that Allenby revived the formula for the next installment. The studio posed Paris Hilton as a water tech mogul responsible for developing NanoDrop, a liquid that’s allegedly 5,000 times as hydrating as water and comes in finger-sized bottles.

“Think how stupid and 2003 you look carrying your sparkling water home from the store,” Hilton says, circling back to the now-familiar theme of burdens and waste. Again, the plug for SodaStream doesn’t come until late in the ad, after Hilton is forced to apologize upon learning NanoDrop is just regular water.

As a whole, the ads are quirky, not preachy. That’s by design. Allenby wants to convert smirking armchair activists to SodaStream users, not turn people off with emotional appeals to save the planet.

“Humor is an amazing tool to speak about things,” says Ronen Harten, who helped develop the ads. “Even if you look at stand-up [comedy], for example, the ability to speak about things that are taboo, that hurt, that are concealed under the surface most of the time. We can use humor to open up on things that we may not be able to do with other messages.”

Soda Jerks

If the humor fails to work, the ads are rife with another element that does tend to play well stateside: controversy.

For years, SodaStream has cultivated an image of a brand that likes to push the envelope with its advertising. As far back as 2012, a SodaStream commercial was pulled by U.K. advertising authorities for “denigration of the bottled drinks market.” In response to the derailment of an £11 million campaign, the company ran a 30-second spot featuring only the sentence, “If you love the bubbles, set them free.”

The next two years saw Super Bowl ads blocked by the network that hosted the game. In 2013, the first ad depicted Coca-Cola and Pepsi deliverymen each breaking a dolly-load of bottles in a race to stock store shelves. The following year, Scarlett Johansson sipped SodaStream in front of the camera before purring, “Sorry, Coke and Pepsi.”

“That was the first time an ad was banned in the United States for reasons other than pornography in 20 years,” Birnbaum says. “The Scarlett Johansson ad was banned by Fox because those guys were chicken to lose $50 million that Pepsi gave for the halftime show featuring Beyoncé.”

Coke and Pepsi are less directly in the line of fire now that SodaStream has repositioned itself as a sparkling water brand. But their water products, Dasani and Aquafina respectively, are still very much the targets of the “Game of Thrones” and Paris Hilton spots, along with every other bottled water brand.

“We’re all about pissing off people that should be pissed off,” Harten says.

The recent commercials have prompted cease-and-desist legal action by the International Bottled Water Association (IBWA), which claims the “Shame or Glory” ad makes “false, misleading and disparaging” statements about bottled water.

Birnbaum disagrees, calling the IBWA a water cartel. “These guys are sitting around the table talking not about how to promote their industry and the goodness of the planet and to humanity. … but coming up with ways to stop SodaStream,” he says.

The IBWA declined to comment further for this article beyond reemphasizing its original statement, though it did point out that the SodaStream advertisements have been criticized by advertising standards bodies in France, Spain and the U.K.—the last of which went so far as to order the “Games of Thrones”-themed ads to be removed from YouTube, not for any particular claim, but because both ads include profanity at the end.

“That was a gift of another few million views. Thank you,” Birnbaum says.

Charity Case

It’s interesting that SodaStream would draft such demagogic messaging given how it has been cast by others in recent years. Until recently, SodaStream was on the receiving end of criticism for operating a factory within the disputed West Bank area near Israel. The factory, which predates Birnbaum’s tenure as CEO, was criticized by human rights groups for operating in occupied territory.

Perhaps the most high-profile of these criticisms came from the global poverty charity collective, Oxfam International, which claimed that the factory furthered ongoing impoverishment and human rights issues in the region. Shortly after appearing in SodaStream’s banned Super Bowl advertisement, Scarlet Johansson resigned her position as an Oxfam ambassador amid the controversy, siding with SodaStream. The company maintained throughout the flap that it was a politically neutral entity that improved the lives of the hundreds of Palestinian employees at the plant.

The controversial factory closed at the end of 2016. SodaStream is now manufactured in a location within the internationally recognized borders of Israel. Birnbaum maintains that the old factory, while “a pain in the ass,” was a force for good.”

“The fact that we were criticized does not mean we are guilty or partially guilty,” he says.

In fact, Oxfam has come away from the controversy in arguably worse position than SodaStream. In December, Oxfam CEO Mark Goldring told an audience of nonprofit professionals the conflict cost the charity thousands of donors and called the dispute “something of a PR disaster.”

A spokesperson for Oxfam declined to comment further.

Birnbaum clearly enjoys Oxfam’s public capitulation, but says he does not feel vindicated by the remarks.

“If they really want to vindicate themselves, then they’re welcome to come visit our factory. I would invite Scarlett Johansson. Let’s talk about coexistence and feeding hungry people and bringing peace to this world because that is the business SodaStream is in, and I believe that is the intended business of Oxfam although they had a slip,” he says.

Next Steps

“We’re just beginning,” Birnbaum says. “And the reason we’re just beginning is because only about 2% or 2.5% of households in the markets we are active in have a SodaStream.”

The goal is to bring that number closer to 30%, especially in Germany. There’s also significant expansion underway in Canada and Japan. And, as has been the case for years, SodaStream remains committed to breaking through in the world’s largest beverage market: the U.S.

Once a perennial target of buyout rumors, SodaStream is now rumored to be in acquisition mode. Birnbaum crows that the company has $100 million in reserves with no debt. “We’re able to now go on the offensive and either invest more in marketing or acquire some other brands, companies or technologies. That’s new for us,” he says.

One thing that doesn’t appear to be on the horizon? Mellowing out.

“We’re not in the business of slowing down, and we’re not in the business of being careful, and we’re not polite either,” Birnbaum says. “We are always honest. We’re not bullshitting. We’re not spinning. We are always telling the truth.”

SodaStream’s Latest

On July 12, SodaStream and Allenby unveiled their latest ad campaign “The Homoschlepiens.” It bears all the hallmarks of previous Allenby work for the brand: celebrities, storytelling, environmentalism and a product pitch late in the running time. Mayim Bialik, of “Big Bang Theory,” stars as a futuristic anthropologist who journeys deep into the jungle to live among the last existing tribe of Homoschlepiens, a remote society that still drinks water from plastic bottles. She develops an attraction to one member of the tribe, Kristian Nairn (the third alum of “Game of Thrones” to appear in SodaStream spots). Later, she tries to explain the primitive concepts of disposable water bottles to students on a fieldtrip to the Museum of Unnatural History. They just don’t understand the purpose. “None of it makes any sense,” one cries. “Exactly,” Bialik responds. “With SodaStream, mankind evolved to make fresh sparkling water at home without carrying polluting plastic bottles.”

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Author Bio:

Zach Brooke
Zach Brooke is a staff writer for the AMA’s magazines and e-newsletters. He can be reached at zbrooke@ama.org or on Twitter at @Zach_Brooke.
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