SodaStream to fizz up the market

By Alex Brummer, December 10, 2012

In recent weeks, Brighton has become the focus of Palestinian boycott activity, with demonstrators noisily picketing the clinical Ecostream store on the city’s main thoroughfare, Western Road.

The store specialises in products made by the Nasdaq-quoted firm SodaStream that has revived a century-old industry of supplying households with refillable and exchangeable C02 cartridges. These are marketed as an environmentally-friendly alternative to the fizzy drinks sold by bottling giants Coca-Cola and PepsiCo.

Brighton has a history of natural friendly start-ups. The first of the late Anita Roddick’s Body Shop stores was launched in the fashionable coastal town, so it might appear exactly the right place for Ecostream to launch in Britain. “Brighton Pavilion” is the only parliamentary constituency in Britain with a Green Party MP, Caroline Lucas, and the town is known for its interest in alternative life-styles.

SodaStream markets itself as the ecologically-friendly contender in the carbonated drinks market. Despite the solidly green credentials, its first free-standing British store finds itself under siege.

The group’s chief executive, Daniel Birnbaum is an enthusiastic supporter of the green cause. “Transportation for the carbonated drinks in the world utilises 100 million barrels of oil every year,” he told the Wall Street Journal recently. “Coke and Pepsi will have to face the reality that their business model cannot be preserved for ever. The world is changing and we are going to call it out,” he says defiantly.

Ecostream has been targeted because one of parent SodaStream’s 13 manufacturing plants is located in the West Bank community of Mishor Adumin. What the Brighton protesters choose to ignore is that most of the 500-strong workforce at the plant are Palestinian, including the general manager.

Moreover, the average wage paid is between €1200 and €1500 per month, a figure six times that of wages paid elsewhere in the territories. So far, from being a source of repression, SodaStream is a model of Israeli-Palestinian economic partnership and just the kind of enterprise needed if a two-state solution to the Middle-East is ever to be forged.

SodaStream is a company with a rich British history. The company was founded by gin distiller Guy Gilbey in 1903 and in its early years, it was the preserve of the well-off. In the 1970s and 1980s, home carbonation became extraordinarily popular and remarkably reached 10 million British homes on the back of the marketing slogan “Get Busy, With the Fizzy.”

The firm went through series of changes of ownership including the big UK-quoted companies, Reckitt & Coleman and Cadbury Schweppes. When Schweppes was spun off from Cadbury, the company was snapped up by is Israeli distributor, Soda-Club with the assistance of private equity.

Birnbaum, a relaxed figure, took over in 2010 and has been focused on turn ing the enterprise around and as a challenger to the bottling giants. He earned his spurs as chief executive of sportswear giant Nike in Israel.
He is a robust defender of the company’s West Bank plant, its management and workforce, and vows he will not give in to the pressure of those who wish to close down the Ecostream outlet in Brighton.
He has a huge amount of work to do as parent SodaStream had been neglected for three decades as it moved from one corporate empire to another.

“It used to be awful,” he admits. “It didn’t taste any good. It didn’t look any good. And it wasn’t even that cheap. We have done a lousy job in years gone by and now we are trying to correct everything.”
It is not without advantage. In Continental Europe it has a good position in the market place, reaching a remarkable 25 per cent of Swedish households. It also has a healthy following in Switzerland and Germany and is available in 44 countries, compared to just 13 five years ago.
In the United States, where there is a long tradition of soda fountains, the company also is making strides and the American operation now accounts for just over one-third of revenue and has seen triple-digit growth in the past year.

No one suggests that SodaStream is going to knock Coke or Pepsi off the soft drinks map. It has a turnover of a relatively modest $400 million against the $100 billion of the world’s two biggest bottlers. Nevertheless, Birnbaum believes his company has the tide of history on its side.

In the UK alone, for instance, Coke and Pepsi generate 35 million cans and bottles every single day in what is a huge environmental threat.

His own offering of carbon dioxide gas cylinders, that sit on the kitchen counter in trendy colours, offers an alternative of creating soft drinks, from root beet to ginger ale, and from economical, naturally-produced syrups.

A few protesters in Brighton look unlikely to divert the company from its ambitions to be the next big wave in fizzy drinks.

Alex Brummer is City Editor
of the Daily Mail

Last updated: 2:35pm, December 10 2012