GMCR & SODA - Not As Similar As People Might Want to Think
Coffee and soda. What is there not to love? If you are unaware SODA (SodaStream International) has dropped over 50% in stock value since August 1, 2011. Even though they recently beat estimates - again, they issued some iffy forecast for the near term future and not that great of guidance. GMCR (Green Mountain Coffee Roasters) on the other hand can't stop going up. In fact, in the past 5 years from this posting (August 16, 2006 to Now), the stock has jumped almost 3600% with splits. That is not a typo. That is, as Jim Cramer would say, MAD MONEY!
Ok, let's look at these two companies not as shareholders but as consumers. Which stock has a better chance of long-term success? GMCR is famous for their 1-cup Keurig coffee makers. They make money on the maker that is usually over $100 or more per unit and they make money on the K-Cups which are $4+ per serving! Now I am looking at it as a consumer, not as a user. I use neither companies products and don't plan to. But let's get serious. Coffee drinkers are not going away. In fact, they are interested in coffee for its taste, power, and because a lot are just addicted to the stuff. I see it in my office all the time. Some even have a coffee schedule that they follow religiously as they spend $1-2 a cup throughout the day. These same people are also what I consider "cheap" by the way they talk and by how they dress, cars they drive, etc. However, coffee is a must for them. We have these machines at work too and people use them as often as they go to the bathroom. They can't get enough of coffee and part of that coffee equation includes GMCR.
Then we have SodaStream. I've visited the website and I know how it works. Even though market analyst and experts like to group SODA and GMCR in the same sentence, they aren't even close to the same. SODA relies on you purchasing another expensive luxury device that ranges from $50+ - depending on how much quality you want in your home-made soda. They also make money from providing you with the soda packets (similar to the K-Cup packets). However, I have yet to see these things anywhere. We don't have them at work and I have never heard of anyone talking about them. Now let's break it down even further.
1) GMCR offers consumers a way to get very good tasting coffee in a smaller serving size at a very expensive price. Coffee consumers have cash to spend by default. They love their coffee and can't live without it. They aren't dedicated to any brand and they will pay up for the new and improved coffee fad. They are usually middle to upper class and pretty much all rich people enjoy a good cup of coffee. GMCR provides the machine, packets, and makes money from businesses to purchase their machines for employee use.
2) SODA offers consumers (mostly home consumers) the option to make their own soda. The soda they make will probably never be close to the quality offered by Coca-Cola or Pepsi products. It just isn't happening because these two companies aren't offering their secret formula for SODA to profit off of. Soda consumers are usually dedicated to their particular brand unlike GMCR consumers. Ever hear of Pepsi vs. Coke fights? On top of that it is usually the middle to lower class people drinking this stuff. It is cheap and satisfies taste buds at a far cheaper price than coffee. On top of that soda drinkers are most likely not willing to drop $50+ on a machine and then more money on the packets, and then try to figure out how to use these carbination devices. They just aren't. Furthermore, in a world where businesses are trying to go 'green', offer exercise programs to employees, and maintain some level of health among workforce, they aren't going to invest in a 'soda making machine' when they already got contracts with either KO or PEP or both in vending machine form.
Bottom line, GMCR is not SODA and vice versa. They are as far apart as you can get. Just because they both have run up some and both are making some decent money doesn't mean that long-term, you will see SODA products in the homes of people in the future. People aren't going to waste time getting a second tier soda when they can get the real thing from either the KO or PEP isle in the store.