Business

02.01.13

How SodaStream Took on the Super Bowl—and Lost, Then Won

The carbonated-water maker made an ad that attacked Coke and Pepsi. CBS turned it down. SodaStream might have caved, but in the end, it’s the one winning on game day, writes Daniel Gross.

Did you hear that a high-profile ad scheduled to air on this Sunday’s Super Bowl broadcast was rejected because of its explicit content? No, I’m not talking about the curvy Kate Upton BMW ad. That’ll air.

I’m talking about an ad for SodaStream, a carbonated-water maker. The ad’s offense is explicitly taking on Coca-Cola and Pepsi, two of the largest and most iconic U.S. advertisers. CBS rejected the ad, reportedly because of its direct assault on the big two carbonated-beverage makers (CBS didn’t return calls for comment). As the music from the movie Deliverance trills, deliverymen from Coke and Pepsi show up at a supermarket and rush to deliver their products. But the bottles pop and disappear, creating a mess. The ad then pans to a shot of a guy using SodaStream. The implication is that SodaStream will make bottled sodas irrelevant. Here’s a description of the ad, designed by Alex Bogusky (one of the creators of the highly successful Burger King and Mini Cooper campaigns).

While you can still see that ad here, it won’t show on game day. Instead, CBS will air an older SodaStream ad, which shows (unbranded) soda bottles disappearing as consumers carbonate their own beverages. It can be seen here.

SodaStream has a pretty basic and nonoffensive business. It’s a bubbly-water-making system that consists of a device, plastic bottles, and containers of CO2. SodaStream also sells syrups so you can add flavor to your soda. (Full disclosure: I own one.) But for a company that makes an uncontroversial product, it’s engendered a surprising amount of controversy, and not just when it comes to Super Bowl ads.

First, like many upstarts, SodaStream has taken an in-your-face, hyperbolic approach to marketing. The company doesn’t just suggest that SodaStream is a money-saving artisanal device. Rather, it suggests that some of the world’s popular brands (and biggest advertisers) are effectively evil forces. Why? They promote the production of polluting bottles and cans. “SodaStream empowers consumers to make their own fresh soda at home in seconds, without the devastating environmental impact of plastic soda bottles and cans, which litter our parks and oceans,” says a statement from SodaStream International. “Our ad confronts the beverage industry and its arguably out-dated business model by showing people that there exists a smarter way to enjoy soft drinks. One day we will look back on plastic soda bottles the way we now view cigarettes; as a dangerous vice, not as an easily-accepted feature of everyday life.”

Video screenshot

Watch the "controversial" SodaStream commercial that CBS refused to air.

Get that? The delivery of Diet Coke to convenience stores is as toxic an endeavor as selling Marlboros.

But there’s more. The company traces its origins to a British firm founded in 1903, and it was once a unit of Cadbury Schweppes. It was eventually acquired by an Israeli company and went public on the U.S. NASDAQ exchange in 2010. Now, most of the Israeli companies that have gone public, and gone global, are industrial, technology, and software firms that cater to other businesses. SodaStream has been one of the few Israeli consumer-facing companies to do so. And that has caused it to get caught up in the frequently bitter politics of consumption. SodaStream has a factory in Mishor Adumim, an industrial zone on the West Bank, as a critical report notes. As a result, groups critical of Israel and its settlement and land policies, like Code Pink, have targeted SodaStream for boycotts. When the Park Slope Food Coop, in Brooklyn, N.Y., made national headlines by debating whether to stock Israeli products, SodaStream was one of the items that could have been affected. (The boycott didn’t pass.)

The company and its agency have been making a carbonated lemonade out of this lemon.

Short sellers—investors who look for overvalued stock they hope will go down—have also looked askance at SodaStream. And it’s easy to understand why. The stock rocketed higher after its initial public offering. It is a manufacturer of bubbles. And investors have seen kitchen fads come go—i.e., the George Foreman Grill. In the summer of 2011, the, um, air came out of the stock as it fell in half.

But, as the chart below indicates, it has recovered.

SODA Chart

SODA data by YCharts

SodaStream, it turns out, is a real business. It has struck alliances with big home-goods retailers like Williams-Sonoma and pushed into new geographic markets. In its most recent quarter, revenues rose 49 percent from the year-before quarter, and profits rose 65 percent. A big factor in its favor is that the U.S. largely remains virgin territory. About half of SodaStream’s revenues come from Europe, and about one third come from the Americas.

That means it has plenty of room to grow in the world’s richest consumer market. And it explains why a relatively small company like SodaStream was so eager to spend big money to get its advertisement on the Super Bowl and why the rejection was a problem. Of course, the company and its agency have been making a carbonated lemonade out of this lemon. They now plan to air the ad online and elsewhere on television. And by courting controversy, the small company managed to elbow its way into the Super Bowl advertising conversation long before kickoff.