PepsiCo Expands Soda Partnership With Home Carbonation Maker SodaStream

By Mike Esterl

PepsiCo Inc. is deepening its U.S. distribution deal with home-carbonation company SodaStream International Ltd., as the cola wars head to the kitchen counter.

Caps filled with Pepsi and Sierra Mist to flavor water carbonated by SodaStream machines will be sold on SodaStream's website and at about 50 Bed Bath & Beyond Inc. stores across the U.S. The expanded trial follows a smaller retail test in Florida late last year.

The move comes as Keurig Green Mountain Inc. prepares to launch a countertop cold-drink machine this fall featuring brands from Coca-Cola Co. and Dr Pepper Snapple Group Inc., PepsiCo's chief soda rivals. Coke has built up a 16% equity stake in Keurig since last year.

The three soft-drink giants are hoping make-it-at-home appliances will help boost U.S. soda industry volumes, which have fallen for 10 straight years. The downturn has been fueled partly by health concerns, as consumers scale back on sugary drinks and drink more bottled water.

Israel-based SodaStream also is seeking a lift after its revenue fell 27% to $190.2 million in the first half of 2015 from a year earlier, including even steeper declines in the U.S., where a big retail push fizzled. The world's leading maker of carbonation machines has struggled to sign up big-name soda brands, and its U.S. household penetration remains below 2%.

In a statement, PepsiCo said it "is exploring multiple technologies in this area and SodaStream is one of several companies we're talking to about potential ideas." PepsiCo declined to name the other companies. It also declined to say whether it would take an equity stake in SodaStream.

Keurig, known for its single-serve coffee brewers, last month said sales of its carbonated cold-drink machine would begin on its website in late September or early October, followed by stores in select cities later this year. It has said it expects the machine, called Kold, to be on shelves nationwide by the 2016 holiday season.

A handful of other companies are targeting home carbonation, including Canadian startup Bonne O, which began shipping its machines to U.S. stores in May. Unlike SodaStream, Keurig and Bonne O machines don't require consumers to exchange carbon-dioxide cylinders.

Under SodaStream's deal with PepsiCo, each cap of Pepsi HomeMade, Pepsi HomeMade Wild Cherry or Sierra Mist HomeMade will make half a liter of soda. They are sweetened with sugar and stevia and have about half as many calories as regular soda. A four-pack of caps will sell for $3.49, and SodaStream machines cost $80 to $200.

Keurig is betting its alliance with Coke and its machine's technology--including flash-chilling--will give it a leg up. But the Kold machine will also cost more, selling initially for at least $300. The Kold pods, which make 8-ounce servings, initially will cost at least $1.

Write to Mike Esterl at mike.esterl@wsj.com

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(END) Dow Jones Newswires

September 11, 2015 09:14 ET (13:14 GMT)

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