Food and beverages giant PepsiCo has reached an agreement with Sodastream to acquire the company for 3,2 billion dollar. For those not familiar with the acquired company, Sodastream is the Israel-based maker of the consumer home carbonation products of the same name. In fact, the system lets you make your own carbonated water at home, and you can add a whole family of flavors to it.
Why has PepsiCo acquired Sodastream even at a heavy price representing a 32% premium to the company’s share price over the past 30 days?
From my point of view, there are three main reasons for that:
First, PepsiCo needs desperately to revitalize its beverages division. While the refreshment products of the Coca Cola arch-rival have struggled, Sodastream has experienced a stellar growth, specially the last quarters.
Putting the resources and marketing machinery of Pepsi behind Sodastream could catapult this already impressive growth into overdrive.
The second aspect is distribution. Sodastream gives, at least in theory, consumers the opportunity to mix and prepare their own glasses of PepsiCola, Mountain Dew, Aquafina or Miranda at home. This gives PepsiCo the opportunity to bypass grocery giants and sell directly to the consumer, thus potentially cutting spending and establishing more direct ties with the customer. It gives also the opportunity of delivering beverages to new geographies where those products haven’t found their way through established distribution channels yet. This implies a great opportunity of testing the probable success of new products in new geographies before launching a full scale commercial introduction.
However, the most important aspect of this acquisition lies in its potential for innovation. Making the Soadastreams connected to the internet can open a wealth of product development possibilities. Placing sensors in the Sodastream machine can report back to Pepsi headquarters which products the customer is consuming in real time. It can also find out whether the consumer prefers stronger or more diluted versions of the original beverage.
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The consumer may even mix different beverages adjusted to his or hers personal taste, which can lead to the creation of complete new products. Indeed, the Coca-Cola company created the new flavor Cherry Sprite making use of sensors placed in dispensers and making use of machine learning when analyzing the resulting data. With Internet of things, big data and machine learning, an internet-connected Sodastream dispenser may reveal which beverages are most consumed, when and maybe even by which type of persona. Sodastream may evolve into the perfect instrument for accelerating the development of new products in perfect product-market fit. True Lean Startup spirit.
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The acquisition of Sodastream can evolve into the perfect example of how digitalization does not only mean cost cuts. It can no doubt be used to create new value for organizations and customers too.
How are you using the potential of digitalization to develop new products and services at your organization?
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