SodaStream’s Bubbly Business: Making Money from Air

By Shlomo Maital

    Daniel Birnbaum & Susan Sarandon

  

 

The next time you face a risky but intriguing career choice, consider Daniel Birnbaum. He had a great job, heading Nike Israel, from 2003-2006.  In early 2007 he was offered the job of CEO of a failing Israeli company, Soda Club, selling an old fashioned product (devices to carbonate water using CO2 cartridges).  He took the job – and the rest is history. Today SodaStream, the reincarnation of Soda Club, is a $300 m. annual business, with $35 m. net income, operating in some 50 countries, selling cool colorful carbonating devices with a powerful ‘razorblade’ model (most revenues come from selling the flavors, so the one-time sale of the machine is no longer a key part of the money model).  One family in every five in Sweden has a SodaStream device.

  How did he do it?  He shared the story with a group of Israeli managers of ‘traditional’ industries last September *.   A key innovation was not in the product, but in how it is advertised.  Birnbaum does not hire expensive ad agencies, who spend millions on ads, half of which are worthless (but, the old cliché goes, ‘you never know which half’).  Instead, SodaStream uses Public Relations firms, whose job is not to buy media time but to get SodaStream into the public consciousness and create ‘buzz’.  In the photo, for instance, Daniel Birnbaum is shown with Susan Sarandon, Hollywood movie star and environmental crusader.  They are shown at a Chicago housewares exhibition. The ‘cage’ contains 10,657 empty bottles and cans, collected by high school kids from a Malvern, Pa. school.  Birnbaum holds one SodaStream bottle – sufficient to replace all those cans and bottles.  If a picture was ever worth a thousand words, this is it.  Sarandon was quoted as saying, :   “The recycling rate in America is less than 35 percent. Troubling news to say the least, particularly considering that this means that 141 billion beverage cans and bottles go to landfill each year.”   PR firms cost money, true – but far far less than ad agencies, and perhaps far more effective.  

    The latest SodaStream product to be launched April 17 is the bright red AquaBar, an on-demand tabletop device that provides hot, cold, ambient and carbonated water, designed by a leading Italian designer. The launch will be at a design show. 

    By the way, SodaStream did an IPO on NASDAQ in August 2010, reached a market value of $1.5 b. a year later, and is still worth nearly $700 m.  That career shift turned out very well for Birnbaum.  Sometimes, it does indeed pay to leap off a cliff…  

  • ·         Based on a case study by Yaara Ben-Nahum, Knowledge & Innovation Center, Technion.