Bloomberg News

Kraft Flavor Deal With SodaStream Sparks Rise: Israel Overnight

January 07, 2012

Jan. 6 (Bloomberg) -- Kraft Foods Inc. triggered the biggest rally since October in SodaStream International Ltd. by announcing a partnership with the Israeli maker of homemade soda machines.

“The partnership lends credence to the emerging at-home soda-making category and, as a result, could help drive further adoption of SodaStream’s system,” said Jon Andersen, a Chicago- based analyst at William Blair & Co., who has an outperform rating on the stock.

Shares of the Airport City, Israel-based company climbed 21 percent this week, the biggest three-day rise since Oct. 6, after Kraft, the world’s second-largest food company, said Crystal Light drink mixes and Country Time lemonade would be used as carbonated flavors with SodaStream machines. The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York rose 0.9 percent, led by Prolor Biotech Inc.

Analysts are betting that SodaStream’s fourth-quarter sales will outperform the company’s guidance of $62 million following better-than expected holiday sales. The Israeli producer will probably report a 30 percent rise in revenue during the last three months of 2011 to $64.60, according to the mean estimate of seven analysts surveyed by Bloomberg.

The Standard & Poor’s 500 Index gained for a third day and the Nasdaq Composite Index increased 0.8 percent after ADP Employer Services said payrolls increased by 325,000 last month, topping the median economist forecast for growth of 178,000 jobs. Applications for jobless benefits decreased 15,000 in the week ended Dec. 31 to 372,000, Labor Department figures showed.

New CEO

The TA-25 Index climbed 2.5 percent this week, the most since the five days ending Dec. 1, led by Teva Pharmaceutical Industries Ltd.

The world’s largest maker of generic drugs surged 9.2 percent this week in Tel Aviv, the biggest rise since July 2008, after announcing that Bristol-Myers Squibb Co.’s Jeremy Levin will replace Shlomo Yanai as chief executive officer.

The shekel rose 0.1 percent to 3.8463 versus the dollar yesterday after dropping for the four previous days. The currency weakened 7.5 percent last year, the worst performance since 2001.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It is also home to the largest number of startup companies per capita in the world.

Prolor jumped to a five-month high in New York, advancing 12 percent to $5.11 after the Tel Aviv shares gained 10 percent to 19 shekels, or the equivalent of $4.94.

‘Great Fit’

The company that uses proteins to improve existing treatments, such as in growth hormone therapy, is rising on the back of “greater confidence in multiple clinical catalysts,” said Raghuram Selvaraju, an equity analyst at Morgan Joseph TriArtisan Group in New York.

Prolor, which shares Chairman Philip Frost with Teva, may be “a great fit” as an acquisition target after Levin assumes his new position as chief executive officer, Selvaraju said.

Kraft said the agreement, covering the production, marketing, distribution and sale of its flavors, is the first time the Northfield, Illinois-based company has used its brands in carbonated drinks. Financial terms weren’t disclosed.

“The Kraft strategic partnership provides an element of credibility to this relatively nascent stage, at-home soda- making trend in the U.S.,” said Mitchell Pinheiro, an analyst at Janney Capital Markets in Philadelphia.

The Kraft flavors will be sold in stores starting in the second quarter, the companies said. Consumers add flavors, such as diet cola and cream soda, to water they’ve carbonated with SodaStream’s machines.

Holiday Season

SodaStream sold more of its soda-making machines than anticipated during the holiday season, according to a Jan. 3 report from Monness, Crespi, Hardt & Co. based on a survey of retailers. The devices were out of stock at more than half of Best Buy Co. and J.C. Penney Co. stores, the report said.

“We believe SodaStream was one of the top gifts this holiday at numerous national retailers and believe management’s fourth quarter 2011 guidance will prove conservative,” Jim Chartier, an analyst at the firm, wrote in the note.

Cellcom Israel Ltd., the country’s largest mobile phone provider, dropped to the lowest level since the company first sold shares on the New York Stock Exchange, dropping 1.7 percent to $15.65. The shares in Israel dropped 0.8 percent to 63.60 shekels, or the equivalent of $16.54.

Rami Levi Chain Stores Hashikma Marketing 2006 Ltd., an Israeli supermarket operator, said yesterday that it signed 10,000 customers since starting its cellular service last month.

--Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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