SodaStream’s CEO on Turning a Banned Super Bowl Ad into Marketing Gold

by Daniel Birnbaum

Photography: Jonathan Bloom/Getty Global Assignment

The Idea: SodaStream was near bankruptcy when Birnbaum joined it, in 2007. He believed that the carbonated beverage industry was ripe for disruption—and that meant going after Coke and Pepsi. What happened was a big surprise.

During the 2013 Super Bowl, I was on an airplane en route to a business meeting, so I didn’t watch the game. But back in Israel, where our company is headquartered, a group of SodaStream executives got together at a bar to watch. In Israel the Super Bowl takes place from midnight to 4:00 AM, but my colleagues didn’t want to miss it. SodaStream had bought an ad—the first ever for an Israeli company and a big expense for a company our size, but the perfect way to increase awareness as we began ramping up sales in the United States.

Our ad reached more than 100 million viewers—but in an unexpected twist, an ad that never even got on the air garnered more attention. We’d originally created a Super Bowl spot that took a direct shot at Pepsi and Coke. We tried to illustrate how the SodaStream home carbonation system could help reduce the number of cans and bottles—one billion—that wind up in landfills worldwide each day.

CBS rejected the ad, and after lots of legal wrangling, we had to use a tamer, less provocative one.

Still, the dispute generated headlines around the globe, and from a marketing standpoint, the commercial was a great investment.

The experience provided some important lessons about how to market effectively at a time when online videos and social media can be just as important as—or even more important than—traditional broadcast television. Some people alleged that we had created the ad specifically in the hope that CBS would refuse to air it. That’s not true. But we certainly benefited from the way things played out.

A New Cola War

When I came to SodaStream, in 2007, it was a sleepy company. I have a background in marketing consumer products—I’ve always loved businesses that involve shipping brown boxes to retail stores. After I graduated from Harvard Business School, I spent two and a half years at Proctor & Gamble, which was a great finishing school for marketing. Then I went to Pillsbury and spent five years launching various brands—including Häagen-Dazs and Green Giant—in Israel, where I had grown up. After a three-year stint with a venture capital firm during the dot-com bubble, I became president of Nike’s business in Israel. It was the ultimate fun job—I loved the company and its culture.

Then, in December 2006, my friend Yuval Cohen, a private equity investor, asked me to visit a company he was thinking about buying. I took half a day off work at Nike and met him at SodaStream headquarters. I was surprised that he was looking at SodaStream. Yuval usually invests in software or technology companies, not consumer appliance companies.

The basic mechanism for home carbonation was invented in 1903 by Guy Gilbey, a London gin merchant, who created an apparatus to inject pressurized carbon dioxide into water to make sparkling water; flavorings could be added to make different kinds of soda. For 50 years or so the apparatus was used primarily at Buckingham Palace and in other homes for British royalty; then, in the 1970s and 1980s, it became a popular consumer product. At a high point in the 1980s, 40% of British households had a carbonation machine. But over the next 20 years the company, which originally operated as a subsidiary of W&A Gilbey, withered. For a while it was owned by Cadbury Schweppes, which did little to grow a business that could cannibalize its main product line. In the 1990s an Israeli entrepreneur bought the company, and by 2006 it was teetering near bankruptcy. There had been no investment, no product innovation, no international expansion—no growth of any kind.

After I’d spent a few hours with the management team, Yuval asked me if he should buy the company. I thought it had potential. I said, “For the right price, why not?” Then I went back to my job at Nike.

Three weeks later, Yuval told me he’d bought SodaStream for $6 million, and he wanted me to become its CEO. I was really surprised—I’d had no intention of getting involved. But it felt like a great challenge. It was very different from anything I’d done before, and he offered me an ownership stake. My friends and family couldn’t believe I was leaving Nike. My son, then 13 years old and an athlete, burst out crying. “Why, Dad? Why?” he asked. At my good-bye party, my Nike colleagues gave me a bunch of antique seltzer siphons. They thought SodaStream was a joke. But I could see there was something here.

I hired an entirely new management team. The most important thing we brought in was optimism. The previous managers had no vision, no dream. They were good people, but they liked to boast that SodaStream had an 85% share of the “home carbonation business”—an obscure industry no one knew anything about. Immediately I said that we would compete in the carbonated beverage business. We transformed our mind-set and our focus from a factory to a consumer-centric organization. Our machine isn’t about putting bubbles into water—it’s about creating a more economical, sustainable, and healthful alternative to regular soft drinks. We redefined our category. Instead of winning in “home carbonation,” I wanted to grow our share of the $260 billion global soda business. I really liked the idea of competing with Coke and Pepsi. Inside and outside the company, we began talking about a new cola war.

Marketing with the Cage

The strategy made sense because the carbonated beverage category is ripe for disruption. Established products are not what the consumer really wants—they contain too much sugar and their packaging waste is hazardous to the environment. They’re also inconvenient: Why should you carry heavy cases home from the grocery store when you can create a superior drink from tap water in just seconds? I believe that consumers are losing their emotional connection with established soda brands. That’s why we’re seeing so many new sparkling beverages, including energy drinks, natural soda, and flavored water. Consumers want something else.

We immediately began focusing on product innovation. Our machine lives on kitchen counters, which is the most precious real estate in a home, so it has to look great and be used regularly—it has to earn its spot. We hired a gifted head of innovation and began working with Yves Béhar, a brilliant designer who is best known for creating several Herman Miller chairs and the Jambox.

Next we focused on distribution. Seven years ago SodaStream products were sold in 13 countries and 25,000 stores. Today we’re in 45 countries and 60,000 stores. Of those stores, 16,000 are in the United States—including Bed Bath & Beyond, Walmart, Target, Williams-Sonoma, Macy’s, and Staples.

Once we had new products and new distribution in place, we needed to let people know. And because of our size, we had to be smart about it. SodaStream’s annual marketing budget is about $75 million. In 2012 Coca-Cola’s marketing budget was about $11 billion. So we challenged ourselves to make every dollar we spent have the impact of $20, to try to break through the noise and the clutter. Since we began this work, we’ve thought a lot about how to generate word of mouth, make ads that go viral, create ambassadors, and be provocative.

One of our biggest marketing wins was something we called the Cage. It was created by an entry-level marketing person in our Belgian office. She calculated the average number of cans and bottles thrown away by a Belgian family each year and then went out and collected that many—all different brands—from garbage containers. She built a giant cagelike box to hold them, demonstrating the sheer volume of waste created by traditional beverages. For Belgium the Cage was about the size of a minivan; for the United States—where a family discards 2,000 cans and bottles a year, on average—it’s about triple that. We put Cages up in 25 markets, generally in high-traffic locations such as airports. Many people stopped to read about the displays, which drove awareness.

Then, one day, we received a cease-and-desist letter from Coca-Cola. One of its executives had apparently seen a Cage in the Johannesburg airport. The company said we were disparaging its brand and claimed that it owned the trademarks on the Coke cans in the display. We checked with our lawyers. It took about five minutes to dismiss the claim: According to South African law, once a product is sold, its marks can no longer be claimed—something known as trademark exhaustion. And because we’d gathered the cans from garbage, Coke would be foolish to claim trademark ownership unless it wanted to claim that it owned the bottles and cans people throw away around the world every day.

Furthermore, we hadn’t done anything disparaging: We simply told the truth about how many bottles and cans are trashed. (Many people believe that most of them are recycled; in reality, about 70% go into landfills, parks, oceans, and incinerators.) We hadn’t created this controversy—Coke started it by sending us the letter—but it certainly got a lot of coverage. When we see that type of opportunity, we’re going to take advantage of it. And we won’t be bullied. I think the fact that we dared to stand up to the big guy is what attracted media around the world.

Game Changer

For years Gerard Meyer, who runs SodaStream’s U.S. business, had joked that two events would signal that our company had really arrived: when we bought a corporate jet, and when we advertised on the Super Bowl. We still don’t have a jet, but in late 2012, when Gerard suggested that we buy a Super Bowl ad, he wasn’t kidding. We looked over the numbers: It would cost about $4 million. To me, it made sense as a strategic statement. It was a way to announce to America that SodaStream was becoming a serious player. The Super Bowl has long been a platform for big new product announcements. Coke is a regular advertiser, and Pepsi was sponsoring that year’s halftime show (starring Beyoncé): We would be making a disruptive appearance on their turf. The longer I thought about it, the clearer the decision seemed. I didn’t even discuss it with our board, which surprised some directors.

SodaStream Facts & Figures

Founded: 1903

Headquarters: Airport City, Israel

Employees: 1,480

 

Source: SodaStream

We immediately got in touch with Alex Bogusky, the brilliant creative who’d done our past ads. A Super Bowl ad has to provide entertainment, and humor is good. Alex came up with a spot he called “Game Changer.” As soon as I saw the storyboards, I fell in love with the ad. It would show Coke and Pepsi trucks pulling up in front of a supermarket. As “Dueling Banjos” played, the two drivers would stack cases of bottles onto hand trucks and then race each other toward the store. As they neared the door, the plastic bottles would start bursting and vanishing, and the video would cut to a guy at a counter demonstrating how a SodaStream machine works and then drinking a glass of cola he’d made himself. The announcer would say, “With SodaStream, we could have saved 500 million bottles on game day alone.” The ad seemed perfect: It highlighted the wasted plastic and transportation involved in trucking and carrying soda and the environmental benefits of our product. I couldn’t wait to see it on the air.

CBS had other ideas. When network executives saw the storyboards, they objected. They said we were mocking the truck drivers—that we made them look stupid. They said we exaggerated the drama by making the soda bottles explode and flood the parking lot. I said I wanted to speak to their CEO about it. They had me talk to their legal guy. I told him we weren’t going to mock anyone or exaggerate anything. We wanted a lighthearted, truthful spot that made our point. I said we would produce the spot in a way that addressed their concerns and then submit it for final approval. So we went ahead and shot the commercial, and at the same time, we hired several of the world’s top experts on law and advertising to help argue our case if CBS still refused to air it.

When I saw the finished spot, I was convinced it would work. There was nothing mean or mocking about it. We submitted it, and CBS rejected it—this time with no explanation. Our legal team couldn’t sway it. According to our research, this was the first time an American broadcast network had rejected an ad for commercial reasons, as opposed to language or indecency. In my mind, CBS rejected our ad because it criticized Coke and Pepsi, which are both major advertisers. I was really upset.

Alex Bogusky was even more upset. He gave an interview to an advertising trade newspaper and vented about the incident. Suddenly the story was everywhere. We immediately put the banned ad online, and millions of people began watching it. (As of this writing it has been viewed more than 5 million times on YouTube.) Newspapers in countries that don’t even air the Super Bowl began doing stories on it.

We were still contractually obligated to air a Super Bowl ad—we’d already bought the time—so we submitted an existing ad called “The Effect.” It shows several people using our machine as soda bottles (of indistinguishable brands) vaporize. It uses the same basic approach as the banned ad, but it’s less fun and less a direct shot at Coke and Pepsi. The ad aired in the fourth quarter, and it did well. Some people worry about placement that late, because if the game turns into a rout, viewership may decline. But we subscribe to the theory that many people are watching the Super Bowl not for the game but for the ads. The next day an ad critic ranked 30 ads shown during the game, and our spot came in seventh.

Still, there’s no question we received more exposure because of the banned ad. One of our agencies did a study and found that we’d gotten 6 billion PR impressions because so many stories were written or aired about the controversy. Al and Laura Ries wrote a wonderful book called The Fall of Advertising and the Rise of PR, and it’s my bible. PR is more credible than advertising. I would much rather invest in PR than in advertising, because with PR it’s not me talking—it’s someone else. Besides, digital media have completely changed the source and quantity of messaging that reaches consumers. As a brand that’s trying to build awareness in efficient ways, we need to cultivate evangelists and ambassadors rather than buy lots of reach and frequency. The banned ad was a win because of the quality as well as the quantity of the exposure we received; and the stories communicated the idea that we were selling a product Coke and Pepsi don’t want people to know about.

By the fall of 2013 we’d already decided to advertise during the 2014 Super Bowl. Because we made the decision earlier in the year this time, our promotional campaign will be better coordinated with our retailers: We’ll do in-store displays and make sure we have the right products in stock. As I write this, we haven’t figured out what the ads will say, but we’re determined to take the campaign to the next level. We want to emphasize that SodaStream isn’t a niche product. The little company that Yuval bought for $6 million now has a market cap of more than $1 billion. We’re still small, but we’re the fastest-growing story in beverage land. This year our Super Bowl message will be that we’re here to stay.

Editor’s Note: When asked for comment, a CBS spokesperson said: “The strategy of achieving free publicity by creating controversies is tried-and-true. It was so before this alleged example, and it will be after as well.”

Daniel Birnbaum is the CEO of SodaStream.