India Markets closed

PepsiCo’s purchase of SodaStream tackles two global challenges at once

Pepsico’s (PEP) decision to acquire home carbonated beverage maker SodaStream (SODA) for $3.2 billion takes on two global problems at once — sugar and plastic.

In recent years, consumers have become more health conscious, and their preferences have shifted away from sugary soft drinks toward healthier options such as sparkling water or lower calorie soft drinks that use natural sweeteners.

“SodaStream allows consumers to customize their own beverages to create not only flavors – but potentially sugar levels — to suit their needs, helping PepsiCo better meet consumer’s needs for products which are not only healthier but do not compromise on taste,” Melanie Felgate, Senior Consumer Insights Analyst at GlobalData, said in a statement.

The other area where SodaStream would fit nicely with Pepsi is the reduction of plastic waste.

“Furthermore as the environmental burden of plastic waste comes to the fore, the concept can also tackle this by reducing reliance on plastic bottles,” Felgate added. “This is likely to attract the 35% of consumers globally surveyed by GlobalData in Q3 2018 who claim they would buy more of specific types of products if they were ‘packaged without any plastic at all.'”

In an interview with Yahoo Finance in 2016, SodaStream CEO Daniel Birnbaum spoke out against the plastic bottle waste and even referred to the bottled water industry as the “biggest advertising and marketing scam ever in history.”

“This whole bottled water industry—it should not exist and I think that in ten or twenty years it will be it won’t exist or it’ll have major warning labels like cigarettes do today,” Birnbaum said then.

SodaStream manufactures and sells sparkling water makers, exchangeable carbon-dioxide cylinders, reusable carbonation bottles, and flavors. More than 12.5 million households actively use SodaStream, according to the company’s annual report.

In 2017, the company saw revenues of $543.4 million, up 14% percent from the year prior. From 2015 to 2017, revenues from the sparkling water makers and the carbon dioxide-cylinders increased from $131.7 million to $212.3 million, while revenues from consumables such as flavors and bottles jumped from $272.3 million to $323.4 million.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter. Send tips to laroche@oath.com.