SodaStream International Ltd (SODA:US), the Israeli maker of home soda machines, dropped to the lowest level in two months after Stifel Financial Corp. said competition from larger rivals will erode the company’s profits.
Shares of Lod, Israel-based SodaStream fell 3 percent to $38.71 in New York, the lowest level since Feb. 7. Coca-Cola Co. (KO:US)’s partnership with Keurig Green Mountain Inc. (GMCR:US) to introduce a system for producing single-serve cold drinks will result in “loss of shelf space,” a group of Stifel analysts including Jim Duffy, said in a note.
Coca-Cola agreed to buy a 10 percent stake in Green Mountain, a company developing a make-your-own, single-serve product similar to SodaStream’s, on Feb. 5 for about $1.25 billion. The announcement added to concern competition will weigh on margins while Chief Executive Officer Daniel Birnbaum said Feb. 26 that he expects “headwinds” to remain after poor holiday sales prompted the company to offer discounts.
“Additional promotion and higher marketing expense is the only defense suggesting a structural challenge for SodaStream margins,” Duffy, who has a sell rating on the stock, wrote in a report dated yesterday. “SodaStream is unlikely to be viewed as a key strategic partner to a major beverage player.”
While Coca-Cola’s decision to purchase a 10 percent stake in Waterbury, Vermont-based Green Mountain spurred speculation rival PepsiCo Inc. would partner with SodaStream to counter the threat, the company’s Chief Executive Officer Indra Nooyi said on a Feb. 13 conference call that it hasn’t committed to an at-home beverage technology yet.
Yonah Lloyd, SodaStream’s chief corporate development and communications officer, didn’t respond to an e-mailed request for comment sent after normal business hours in Israel.
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