Could "PepsiStream" Actually Work?

When analysts at Barclays slapped a $100 price target on shares of SodaStream (NASDAQ: SODA  ) Monday, something tells me they didn't expect the stock to take just four days to reach it.

Sure enough, shares of SodaStream briefly jumped more than 40% during premarket trading today after rumors surfaced saying industry giant PepsiCo (NYSE: PEP  ) was in talks to acquire the comparatively tiny at-home carbonation specialist.

Unfortunately for excited SodaStream investors, Pepsi CEO Indra Nooyi wasted no time telling CNBC the rumor was "totally and completely untrue." Even so, SodaStream is still up 63% so far this year, and more than 5% today as of this writing:

Source: Google Finance.

Of course, that raises the question: Could "PepsiStream" actually make sense?

On one hand...
I agree with fellow Fool Rick Munarriz, who quickly chimed in this morning to say in no uncertain terms that this particular buyout would make little sense.

After all, he noted, acquiring SodaStream would not only anger bottlers who depend on Pepsi's existing business model, but also would largely make Pepsi's core business obsolete by cannibalizing its own canned and bottled sales.

What's more, if Pepsi were to simply buy SodaStream with the intention of shuttering its doors to eliminate an up-and-coming competitor, you can be fairly sure the brand would suffer greatly from resulting consumer backlash. Remember, while SodaStream still only commands a less than 2% share of the 130 million households in the United States, the tiny company has made it abundantly clear it wants to make life better for consumers over the long run.

On the other hand...
Even so, nobody can ignore the fact that SodaStream is growing like a weed. Remember, I mentioned a few weeks ago that the company hopes to increase annual sales by more than 80% to $1 billion by 2016, all while en route to its long-term goal of achieving 10% market penetration here in the U.S. If that sounds a little ambitious, however, take a look at Sweden, where an impressive 25% of all consumers use SodaStream's carbonation systems.

In the meantime, Pepsi was only able to increase its own net revenue last quarter by a meager 1% year over year, instead preferring to place greater emphasis on still-low 4.4% "organic revenue growth," which doesn't take into account the cost of structural changes or the negative effects of foreign exchange translation. Fellow industry giant Coca-Cola (NYSE: KO  ) fared even worse, posting a net revenue decline of 1% last quarter. Like Pepsi, Coke also wanted to emphasize its organic net revenue, which did grow 2% when you take currency and structural changes out of the mix.

The bottom line is that, while these beverage titans remain massively profitable, it's impossible for either of them to match SodaStream's growth. For now, though, Coke and Pepsi are happy to do their best to maintain their current markets.

Between a rock and a hard place
However, while some people may believe SodaStream is a fad, the company is also happy to continue chipping away at the markets Coke and Pepsi have dominated for so many decades.

In the end, though "PepsiStream" certainly doesn't make sense now, SodaStream has set itself up nicely to put the hurt on its larger competitors as consumers increasingly accept its at-home carbonation machines as a viable alternative.

It certainly won't happen overnight, but if the trend continues over the next few decades, we may just see the folks at Coke and Pepsi ultimately forced to abandon their current business model in favor of SodaStream's more efficient, environmentally friendly ways.

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The only difference, however, is that SodaStream could just grow too large to acquire by then.

A deeper dive into the 'Stream
SodaStream's carbonation technology sounds simple, but this razor-and-blade company offers an intriguing opportunity for growth that could very well disrupt the soda industry. The Motley Fool's premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.