WHEN NIKE executive Daniel Birnbaum became CEO of the sleepy 104-year-old SodaStream International in 2007, his kids were less than thrilled. "My 12-year-old was in tears. Nike was part of his identity," says Birnbaum, a Queens, New York, native. "Here I was going to this company that people did not know existed, and it was not exactly the most proud place to work." Birnbaum has since transformed the "aerating liquid apparatus" company into a sexy soda-maker brand taking over granite countertops across the globe. After a year in which the Israel-based company surpassed $150 million in revenue, gained distribution in 4,000 U.S. retail stores, and had a hot IPO, Fast Company talked to Birnbaum about saving energy, why Coke and Pepsi should be nervous, and actress Tori Spelling's (water) drinking problem.
You've done for the seltzer maker what Method did for cleaning products. Was the reinvention all about designing a better product?
The machines are really beautiful and they have won many design awards, but it wouldn't have been enough to put what we call "a new skirt" on the machine — change the color or the look. I've spent my career at consumer-product companies, and I realized the whole mind-set of the company had to shift from industrial to consumer oriented. The first thing we did was change the mind-set of the product from functional to lifestyle — an object of desire. That kitchen counter is some of the most expensive real estate in the world.
To what degree are you taking on Pepsi and Coke?
Only 2% of water drunk in this country is seltzer. It's growing quickly, but the soda opportunity represents a multiple of 80 to that.
So once we had the product right, we recognized it wasn't only the appliance but the syrups. We did a lot of research and we saw that consumers want a healthier soda. Prior to my arrival the company had been using artificial colors and other types of preservatives. We created more than 20 natural syrups and essences that don't use high-fructose corn syrup or Splenda, and we have regional flavors depending on the market. Italians have a flavor called chinotto, the Swedes have must, the Brits have ginger beer, and Americans have an equivalent to Dr Pepper. Diet cola is our No. 1 seller in the U.S.
While we were busy transforming our company, the world changed too. Health and wellness. Environment. Convenience. Savings. For us it's the perfect storm because we hit all these megatrends without any trade-off. The energy required to make 140 billion bottles and cans of soda and water every year is 100 million barrels of oil. That's enough to run 1 million cars. All of that packaging can be obsolete with SodaStream, so we're talking revolutionary stuff.
Were you inspired by any business models that fall outside of the beverage industry?
We created a razor and a razor-blade business model. The razor is obviously the soda maker and we have three blades: the CO2 refills, the flavor syrups, and the bottles. So it's not a one-time sale — the blades are our future revenue stream. We acquire users, build our installed base, and we cultivate those users for life.
Have you been surprised by customers' strong reactions?
On Access Hollywood recently, Tori Spelling said, "I hate water. But I make my own carbonated water at home. Have you seen this thing? It's called SodaStream. You just press the button — spp spp spp — and you have carbonated water!" It's an incredible example of what a brand ambassador can do, and we didn't even solicit her.
A version of this article appeared in the April 2011 issue of Fast Company magazine.