SodaStream's CEO explains the company's US growth plan and move to flavored syrups 2 years after being acquired by PepsiCo
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PepsiCo's SodaStream has attracted consumers for years in many European countries, such as Germany, where it introduced Mountain Dew- and Pepsi Max-flavored syrups for its machines earlier this year. But the US, where fewer households buy SodaStream products, presents the biggest opportunity for the brand, CEO Eyal Shohat told Business Insider in an interview. "For me, there's so much room to grow this category," he said. "We just need to continue to do what we're doing and create a loyal user base of SodaStreamers." To that end, SodaStream has gotten a boost from the pandemic: Shohat said that sales of the company's carbonating machines were up 135% during the first half of 2020, making it the kitchen appliance with the fastest-growing sales during the period, according to NPD. Sales of carbon dioxide canisters have also ballooned in 2020 as people consume more beverages at home and stock up, he said. Read more: SIGN UP NOW: Speakers from Macy's, BARK, Salesforce, DoorDash, and more talk about subscription services, "last mile delivery", and social justice at the IGNITION: A Retail Revolution virtual event But the beverage brand is trying to do more to grow sales in the long run, Shohat said. One initiative has been introducing more flavorings that consumers can add to water carbonated with SodaStream machines, he said. In the US, the most recent addition to the flavor lineup is Bubbly, an existing sparkling water brand that PepsiCo sells through its carbonated soft drinks business. "Once the pandemic started, we saw a big shift... in our direct sales, more towards the consumables, the [gas cylinders] and the flavors," he said. "They became the much bigger part of the sales on our website. We also saw this in brick-and-mortar." Flavor concentrates that allow consumers to make SodaStream versions of PepsiCo's biggest soft drink brands, such as Pepsi and Mountain Dew, have been another area of focus. The company introduced some of those flavors in Europe and Australia over the last year. Early results from Europe and Australia suggest that the flavor concentrates from the top brands aren't eating into sales of those products in their traditional canned and bottled format, Shohat said. In many cases, he added, the new concentrates are leading customers who are familiar with one product to try the other. "There's a halo effect [for] the brands in Europe in some cases, like Germany," he said. While Shohat said that SodaStream has no immediate plans to introduce the top-brand flavors in the US, he said he hopes to add them "in the next couple of years." "We have quite a big flavors business in the US, but still, we see most of our consumers using the system to mostly consume sparkling water," he said. "Once we will launch those well-known brands, it will move the needle" with "more people consuming more flavors on the system." PepsiCo bought SodaStream for $3.2 billion in 2018. The move gave the beverage giant a foothold in the at-home beverage category, "a completely different market that we really weren't touching at all," CFO Hugh Johnston told analysts in 2018 after the company announced the acquisition. While still small relative to still water, sparkling water sales in the US have been growing. Sales of sparkling water grew nearly 13% during the 12 months through March. Sales of non-carbonated bottled water, meanwhile, grew slightly less than 4%, according to data from IRI. "Flavored sparkling water as a segment is one of the fastest-growing categories within the beverage landscape globally," Shohat said. "You see more and more consumers shifting into consuming healthier beverages and sparkling water."Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
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