How can a small company compete against industry giants? The best way is to make a lot of noise. This year, one of the smallest advertisers on the Super Bowl is attracting lots of attention as it strives to break through against Coke and Pepsi.
SodaStream (NASDAQ: SODA) has had a bumpy ride over the past year. The $562mm (FY2013 preliminary revenues) Israeli company makes in-home carbonators that allow consumers to transform tap water into sparkling water or soft drinks. Sodastream has already made significant inroads in Europe (the company estimates that it has 19% household penetration in Finland, 9% in the Czech Republic and 6% in France), and has a small-but-dedicated following in the U.S.
Last year’s Super Bowl helped SodaStream achieve a threshold level of awareness, particularly when its aggressive Super Bowl spot was rejected by CBS (an edited version ultimately aired during the big game).
This year’s spot is tamer, but it has attracted even more attention. Not only was it again banned from the big game, but the choice of Scarlett Johansson has attracted both positive and negative attention. For the moment, though, it’s helping tiny SodaStream gain enough attention to make a big investment pay off.
And it can’t come a moment too soon …
Challenging 2013 Results
SodaStream’s revenue growth for 2013 was around 30%, which sounds great until you consider the 50% growth the company experienced in 2012. The preliminary 2013 earnings report undercut analyst estimates by $5mm and sent shares tumbling by 20% in mid-January.
“We failed to deliver our profit targets and are disappointed in our fourth quarter performance,” CEO Daniel Birnbaum wrote in the earnings release. “These preliminary results reflect a challenging holiday selling season in the U.S. and several factors, mostly from the second half of the quarter that negatively impacted our gross margin.”
Translating this into marketing language, Birnbaum is suggesting that the company many have discounted heavily to increase market penetration and that the results were not what the company had hoped.
Using Rejection To Gain Acceptance
And yet, from a brand standpoint, SodaStream has made some smart moves in the past few years.
Around four years ago, the company created an art installation that dramatized the empty soda bottle waste created by a single family. Thirty of these installations travelled around the world until 2012, when a South African installation attracted the attention of the local Coca-Cola bottler, which issued a cease-and-desist letter to SodaStream. Instead of desisting, SodaStream fought back, and got lots of mainstream media attention with an environmental version of the David & Goliath story.
Also in 2012, the brand forged a partnership with legendary adman Alex Bogusky, who had collaborated with the Center for Science in the Public Interest to launch a spot attacking soft drinks called “Real Bears”.
That rejection helped the SodaStream get noticed during the Super Bowl last year.
An Unexpected Sponsorship
SodaStream planned to pursue a more conventional path for its second Super Bowl appearance this year. A chance encounter changed the strategy. SodaStream CEO Daniel Birnbaum described it to me this way:
I’m sitting in my office in Tel Aviv and we get a phone call that there’s an American in Paris looking to find a gas replacement for her soda maker. I contacted my Paris office and I asked them to get the replacement to this consumer. A week later I get a handwritten thank-you note from S.J. It turns out S.J. was Scarlett Johannsen. She drinks only sparkling water from SodaStream and travels with it wherever she goes, etc. She just loves the brand. We were on a path to do a different commercial for the Super Bowl, but when this happened we changed directions.
Birnbaum previously worked on celebrity sponsorships for Nike, so he had a very clear idea of the potential risks and rewards of engaging a celebrity for SodaStream. Unlike the typical paid endorser, however, Johansson was already a brand enthusiast. She travels with a SodaStream and has bought them for her friends and relatives. The Johansson partnership quickly propelled SodaStream into the limelight of the SuperBowl, getting breathless coverage from celebrity media outlets.
SodaStream also managed to engineer another mini-scandal that helped goose the coverage: rejection of its proposed Super Bowl ad from Fox. Here’s the spot they submitted, which has just been released online today:
Three words caused the rejection: “Sorry, Coke and Pepsi.” So the SodaStream spot that actually runs on the Super Bowl won’t call out the competition. But the rejection has created news.
The Johansson partnership also created an unexpected controversy, because of Johansson’s status as an Oxfam ambassador since 2005. Oxfam supports the BDS movement, which boycotts businesses in the Israeli settlements/occupied territories. SodaStream has a manufacturing facility in the settlement of Maale Adumim with 1300 employees. The boycott supporters used Johansson’s partnership with SodaStream to push Oxfam to drop her – and to make headlines.
BDS calls SodaStream “part and parcel of this system of oppression“. Birnbaum counters: “we are part of the Palestinian economy and we’re employing 500 Palestinians who support families and we pay them Israeli wages and give them health insurance. There can be no peace without jobs.”
Oxfam for its part says this:
Oxfam believes that businesses that operate in settlements further the ongoing poverty and denial of rights of the Palestinian communities that we work to support. Oxfam is opposed to all trade from Israeli settlements, which are illegal under international law.We have been engaged in dialogue with Scarlett Johansson and she has now expressed her position in a statement, including stressing her pride in her past work with Oxfam. Oxfam is now considering the implications of her new statement and what it means for Ms. Johansson’s role as an Oxfam global ambassador.
Meanwhile, Ms. Johansson issued a statement over the weekend, affirming her commitment to SodaStream:
I remain a supporter of economic cooperation and social interaction between a democratic Israel and Palestine … SodaStream is a company that is not only committed to the environment but to building a bridge to peace between Israel and Palestine, supporting neighbors working alongside each other, receiving equal pay, equal benefits and equal rights.
The question of what will actually create peace in the Mideast is thankfully beyond the scope of this column, but it’s clear that this controversy holds some danger for SodaStream. Until the Johansson partnership raised the profile of this issue, it was not headline news for SodaStream. Now it has generated headlines in mainstream news and disapproving commentary from some of the New York media.
SodaStream has most often been cast as the spunky upstart in media stories of the past few years, so this is the first time the company has found itself on the wrong end of a media narrative. It’s too early to tell whether this story will fizzle away or take hold and cause real problems for the Israeli soda maker. But it is already a concern in the U.S. because the very small community where this story is gaining traction overlaps with the strongest supporters of the brand.
If the story fades, SodaStream can move on unhindered. If it gains momentum however, SodaStream may need to decide whether it feels more passionately about its environmental mission or its approach to the Israeli/Palestinian question.
Can SodaStream Break Through?
Looking past the controversy, can the Johansson partnership and a second Super Bowl spot can help SodaStream break through? On one hand, the company has gotten lucky again: they’ve kept themselves in the news throughout the coverage of Super Bowl advertising building up to the game itself. They’ve already generated millions of impressions that will lead to new users. It’s still a short spot during a long game, and the creative itself probably won’t break through. So we’ll have to wait until Sunday to see whether the viral effect propels SodaStream through the uprights.
The brand needs to ensure that the issues being raised by Oxfam and BDI don’t take hold in the US. SodaStream has one clear mission as a brand: to present an environmentally friendly, less expensive alternative to Coca-Cola and Pepsi. Its single-minded goal should be to force Coke and Pepsi to make their branded drinks available on its machines. Anything that distracts from this mission dilutes SodaStream’s strength.