Source: Forbes
I’m sure you’ve heard the news that Pepsi is buying SodaStream for $3.2 billion. Analysts seem to like it (see fellow Forbes Contributor, Peter Cohan’s “4 Reasons To Love PepsiCo’s $3.2B SodaStream Buy“), so perhaps this “hedge” is a good business decision. But is it only a hedge? I am hopeful, though admittedly not entirely convinced, that the acquisition might be evidence of a turning point for Pepsi’s brand.
Let me explain.
SodaStream is to Pepsi as live streaming was to Netflix
Remember when Netflix was known only as a DVD-through-the-mail business? Yeah, me neither. But it was and the brand wisely hedged its bets by cannibalizing its own DVD business and offering live streaming movies at the same time.
It was a transformative strategy. While Netflix still offers DVDs through its DVD.com brand, the thrust of the “Netflix” brand is now associated with streaming.
The same business case could be made for Pepsi acquiring SodaStream. Homemade sodas and seltzers are a hedge, but also a ticket to transformation. From bottles, cans and liquid to reusable bottles, flavoring and tap water.
What’s driving this transformation? Where the Netflix transformation was largely driven by advances in technology with the benefit of convenience, Pepsi’s transformation is largely driven by advances in pollution (and consumer pressure to clean up the planet).
Did you know only one in five water bottles is recycled? Or that the other four water bottles contribute to 3 billion pounds of landfill each year? Not to mention the fact that 17 million barrels of oil are used to produce bottled water? (source for all three points: Environmental Center)
Pepsi knows that the pollution pressure is only going to increase.
SodaStream may be seen by Pepsi as a hedge, sure, but perhaps they also see it as the new way consumers are going to consume bubbly drinks.
Israel Trade and Economic Commission in Sydney, Australia 