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

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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 Soda Stream ex-ecutives got together at a bar to watch. In Israel the Super Bowl takes place from mid-night 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 land-fills 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 impor-tant lessons about how to market effec-tively at a time when online videos and

SodaStream was near bankruptcy when Birn-baum joined it, in 2007. He believed that the carbonated beverage industry was ripe for dis-ruption—and that meant going after Coke and Pepsi. What happened was a big surprise.

The Idea

by Daniel Birnbaum

daniel Birnbaum is the Ceo of sodastream.

January–February 2014 harvard Business review 39

How I Did It…hBr.org

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 WarWhen I came to SodaStream, in 2007, it was a sleepy company. I have a background in marketing consumer products—I’ve al-ways loved businesses that involve ship-ping 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 presi-dent 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 Yu-val 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 head-quarters. I was surprised that he was look-ing at SodaStream. Yuval usually invests in software or technology companies, not consumer appliance companies.

The basic mechanism for home carbon-ation was invented in 1903 by Guy Gilbey, a London gin merchant, who created an apparatus to inject pressurized carbon di-oxide into water to make sparkling water; flavorings could be added to make different kinds of soda. For 50 years or so the appara-tus was used primarily at Buckingham Pal-

ace 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 origi-nally operated as a subsidiary of W&A Gil-bey, 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 be-lieve 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. Im-mediately 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 orga-nization. Our machine isn’t about putting bubbles into water—it’s about creating a more economical, sustainable, and health-ful alternative to regular soft drinks. We re-defined our category. Instead of winning in

“home carbonation,” I wanted to grow our share of the $260 billion global soda busi-ness. 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 CageThe strategy made sense because the car-bonated beverage category is ripe for dis-ruption. 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 spar-kling beverages, including energy drinks, natural soda, and flavored water. Consum-ers want something else.

We immediately began focusing on product innovation. Our machine lives on kitchen counters, which is the most pre-cious 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 innova-tion 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—in-cluding Bed Bath & Beyond, Walmart, Tar-get, Williams-Sonoma, Macy’s, and Staples.

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.

HoW I DID It

40  Harvard Business Review January–February 2014

Once we had new products and new dis-tribution in place, we needed to let people know. And because of our size, we had to be smart about it. SodaStream’s annual mar-keting 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 am-bassadors, and be provocative.

One of our biggest marketing wins was something we called the Cage. It was cre-ated by an entry-level marketing person in our Belgian office. She calculated the av-erage 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 Bel-gium the Cage was about the size of a mini-van; 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 ex-ecutives 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 dis-miss 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 own-ership 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 bul-lied. I think the fact that we dared to stand up to the big guy is what attracted media around the world.

Game ChangerFor years Gerard Meyer, who runs Soda-Stream’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 an-nounce to America that Soda Stream 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

Left: SodaStream’s Cage at the International

Home and Housewares Show in Chicago, March 2011. RiGht: Coke and Pepsi face off in SodaStream’s banned ad, “Game Changer” (top). In the ad that ran instead, plastic

soda bottles vaporize when people use SodaStream

machines (bottom).

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January–february 2014 Harvard business review 41

even discuss it with our board, which sur­prised some directors.

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 ob­

jected. 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 de­

cline. 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 in­store 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 fastest­growing story in bev­erage land. This year our Super Bowl mes­sage will be that we’re here to stay.

HBR Reprint R1401A

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

sodastream Facts & FiguresFounded:� 1903Headquarters:� Airport City, Israelemployees:� 1,480

REvENuE

AdjustEd NEt iNcomE(in US$ millionS)

2009

136.210.0

2010

208.416.9

2011

289.0

32.9

2012

436.3

50.0

Source SodASTReAm

How i did it

42  Harvard Business Review january–February 2014

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