Soft-drinks began their life in the 19th Century as sugary cordials marketed first and foremost as health tonics. And nearly one hundred years later as the less salubrious effects of sugary drinks becomes an ever greater commercial challenge to the category, a new brand acquisition sees Pepsi acquiring Soda Stream – a product that allows individuals to effectively blend their own effervescent libations either with Soda Stream’s own range of flavours or get more creative in making flavours themselves.
From an acquisition point of view, the product represents a number of compelling category trends that are valuable to Pepsi – the rise of everyday products being reborn as “craft items” to be enjoyed as premium connoisseurship, the ability to use less packaging, ostensibly healthier drinks and a powerful recurring revenue stream akin to that of Nespresso. Moving from the supermarket shelf or fridge to the heart of the kitchen with a more upmarket customer also represents a powerful potential opportunity for Pepsi.
But in other ways, Soda Stream sticks out like a sore thumb. Pepsi’s mainstream snack and drink brands like Doritos and the eponymous cola are the kinds of things that Soda Stream’s audience would likely reject in hand and it’s not hard to imagine Soda Stream customers reacting with huge disappointment at the news. Soda Stream’s offer fits well with millennial culture whereas Pepsi is establishment and old-school by comparison – with many products that fall afoul of increasingly health-conscious consumers’ changing tastes. Soda stream’s approach to channel distribution, price point and premium marketing communications are markedly different to that of the FMCG giant. Pepsi will need to tread with care in terms of how it manages its shiny new brand to realise the return on its investment and make up the 30% premium it paid for the business.
From cultural integration, to distribution to brand management and commercial metrics and targets, Soda Stream needs to be nurtured and incubated. Treated with care, Soda Stream has the potential to be a Trojan Horse for a business intelligence and competencies that may not be second-nature to Pepsi today – a long term return-on-investment that is far more valuable than any sales metric. In the meantime however, the fact that Sodastream announced its best ever quarterly performance on the eve of the acquisition suggests that Pepsi should be more than happy to let the company do what it does best in the short term, with minimal interference.