SodaStream Housewares Show Highlights Continuing Innovation

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1 EQUITY RESEARCH COMPANY UPDATE March 11, 2012 Stock Rating: OUTPERFORM mo. Price Target $55.00 SODA - NASDAQ $ Yr. EPS Gr. Rate 30% 52-Wk Range $79.72-$27.60 Shares Outstanding 19.9M Float 13.0M Market Capitalization $687.9M Avg. Daily Trading Volume 1,493,082 Dividend/Div Yield NA/NM Fiscal Year Ends Dec Book Value $ E ROE 79.9% LT Debt $0.0M Preferred NA Common Equity $218M Convertible Available No EPS Diluted Q1 Q2 Q3 Q4 Year Mult. 2011A x 2012E x 2013E x Reflects adjusted EPS for EPS estimates for 2012 and 2013 are adjusted to exclude IPO-related share-based compensation expense. CONSUMER & BUSINESS SERVICES/CONSUMER, HOUSEHOLD & PERSONAL CARE PRODUCTS Housewares Show Highlights Continuing Innovation SUMMARY Our meeting with at this year's Housewares Show provided us with increased confidence in our bullish stance on the shares. Importantly, it highlighted the company's commitment to innovation, as evidenced by the new Revolution electric soda maker, while underscoring our belief that the slowdown in machine unit shipments in 4Q severely understates the health of the business. Reiterate Outperform rating and $55 DCF-derived target price. KEY POINTS We met with SODA senior management over the weekend at the International Home + Housewares Show in Chicago, IL, and came away with a greater level of confidence in our bullish stance on the shares given the company's commitment to innovation and our belief that business trends are healthier than recent data points indicate. Among the highlights of the show was the introduction of the new Revolution soda maker, the company's first electric version, which is expected to launch globally by 4Q. This machine greatly improves convenience and the overall user experienced by dramatically reducing the time to make a liter of soda. Another innovation was the new Sodacap, a syrup-filled pod that users simply depress onto the top of the bottle in order to dispense the flavor. In our view, this technology, along with that found in the Revolution, puts SODA on a course for the introduction of a single serve machine sometime in We also circled back on 4Q results, and in particular the slowdown in soda maker unit sales. Management once again emphasized that this is a "sell-in" number impacted by a number of issues and does not reflect "sell-through," which remains healthy. In fact, adjusting for certain distributor hiccups, unit sales were up nicely. Finally, we had a chance to speak with other players in the home carbonation category. We continue to believe competition remains very manageable, as SODA's innovation pipeline, coupled with its first-mover advantage and distribution gains, position it very well for future growth. Stock Price Performance 1 Year Price History for SODA Q1 Q2 Q3 Q Created by BlueMatrix Company Description is the world's leading manufacturer of home beverage carbonation systems, which enable consumers to convert ordinary tap water into carbonated soft drinks and sparkling water. Joseph Altobello, CFA Joseph.Altobello@opco.com Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. See "Important Disclosures and Certifications" section at the end of this report for important disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, where applicable. Oppenheimer & Co. Inc. 85 Broad Street, New York, NY Tel: Fax:

2 Notes From Our Meeting With Management Housewares Show Highlights Continuing Innovation We had the opportunity to meet with members of senior management at the International Home + Housewares Show in Chicago, IL, this past weekend, including CEO Daniel Birnbaum and Executive Director of Corporate Development and Communication Yonah Lloyd. The meeting came on the heels of SODA's announcement of 4Q results and 2012 guidance on February 29, both of which were better than expected, though since then the stock has been under significant selling pressure. That said, we remain convinced of the viability of the home carbonation category in the US, the world's largest beverage market, as SODA has been operating successfully in a number of international markets for years. In addition, we continue to believe the company has significant growth opportunities in front of it, including distribution expansion in the US (where household penetration is still a very low 0.6%) as well as other international markets, such as Japan (which SODA recently entered), Brazil (which is launching shortly) and India (slated for later this year). Further, we anticipate additional licensing agreements for flavors similar to the one recently reached with Kraft (KFT, $48, NR) for the Country Time and Crystal Light Brands. Importantly, these growth opportunities do not appear to be fully discounted in the stock, which is currently trading at 16x and 12x our 2012 and 2013 EPS estimates of $2.15 and $2.80, respectively. Thus, we reiterate our Outperform rating and $55 DCF-derived target price on the shares, which we expect to remain volatile though following a generally upward trajectory in the coming quarters. There were a number of highlights for SODA at this year's show, beyond the appearance of celebrity fitness guru Jillian Michael, who provided an endorsement of the product (last year's celebrity endorser was actress Susan Sarandon). Perhaps most notable was the introduction of SODA's first electric soda maker, the Revolution (recall that the company had previously referred to this as the Edison, its code name while in development), which is set to launch globally by 4Q of this year with an expected retail price at or below $200. We believe this is a meaningful step forward for the company, as it improves the consumer experience in a number of ways, including reducing the time to make a liter of soda to about 10 seconds from prior. For example, the user will no longer need to screw the bottle into the machine, as the machine will instead grab it through a patent-pending technology the company is calling a "flower" which it plans to expand to all future models. Also, the user will no longer need to depress a lever in order to inject CO2 but instead press one of four buttons, corresponding to low, medium, high and "turbo" levels of carbonation, thereby offering elements of both individuality and consistency. Another innovation introduced at the show was the Sodacap, a syrup-filled pod that the user will depress onto the top of the bottle of carbonated water in order to release the syrup. Sodacaps are expected to hit retail shelves by July 4 th and retail at $4.99 for 10 one-liter pods, which is an increase from typical SODA flavors that retail at $4.99 for 12 servings. Like the Revolution, Sodacaps should provide both convenience and consistency from a flavor perspective, with the latter very important as SODA looks to pursue additional partnerships with beverage companies similar to the one with Kraft (we should note that management was very optimistic on this front). That said, as much of an advance as the Revolution represents, we continue to await the introduction of a single serve machine, which the company has alluded to in recent public forums. Based on our discussions with management, it sounds like there are still technical issues to resolve, including the method by which flavors will be dispensed on a unit dose basis. While this represents an engineering challenge, it does not appear to be insurmountable by any means and should build on both the flower and Sodacap technology. Thus, we continue to expect a single serve machine from SODA sometime in

3 Soda Maker Shipment Data Misleading It's important to circle back on 4Q results and in particular the 8% increase in global soda maker unit sales. Not only was this a marked slowdown from recent quarters, but if we adjust for the strong growth in the US (up 45%), soda maker unit sales in the rest of the world were actually down 8%. As during its earnings conference call two weeks ago, management emphasized that this represents "sell-in," a number impacted significantly by a number of issues, most notably the timing of shipments, and is not indicative of "sell-through," or customer takeaway, which continues to be strong. Recall that SODA was lapping a very challenging base period that included the pipeline fill for the company's expansion into Bed, Bath & Beyond last year. In addition, during last year's holiday season, a number of SODA's retailer partners and distributors experienced stock-outs and lost sales. This year, in an attempt to avoid a similar situation, many of these retailers and distributors moved up their shipment dates, effectively pulling forward sales that that would have normally occurred in 4Q. Also, SODA experienced issues with a couple of its key distributors, which significantly impacted the quarter. For example, its distributor in the Nordics did not submit any orders in 4Q owing to financial difficulties (in fact, it eventually sold its distribution rights in the region to SODA). Further, orders from the company's distributor in the Czech Republic, which also covers Slovakia, Hungary and Poland, were depressed due to its overbuying during the first half of the year; however, on a sell-through basis in the region, machine sales were up 32% and CO2 sales up 115% in the quarter. In fact, if we exclude the impact from the Nordics and Czech Republic distributors, machine unit sales were up a very healthy 26% outside the US. Competitive Risks Remain Manageable In addition to the slowdown in soda maker unit sales addressed above, another factor that we believe has been weighing on the shares of late is the risk of competitive entry into the home carbonation market. To this point, we also had the opportunity to review and meet with some of SODA's competitors at the Housewares Show, including Primo Water (PRMW, $3, NR), which recently introduced its Flavor Station home carbonation system. That said, we maintain that PRMW will likely continue to have difficulty gaining distribution at retail, as it is thus far available only at approximately 500 Lowe's locations (though it expects to go chain-wide shortly). Put simply, while we believe the category to be viable, we don't delude ourselves with the notion that home carbonation systems will ever approach the ubiquity of other small kitchen appliances, although new entrants to the category should grow the overall market. Also, the need to avoid confusion on the cylinder exchange side likely means that many retailers will choose to carry only one brand, which positions SODA very well given its first-mover advantage. 3

4 (In uro millions, except per share data) Income Statement Mar11A Jun11A Sep11A Dec11A 2011A Mar12E Jun12E Sep12E Dec12E 2012E Mar13E Jun13E Sep13E Dec13E 2013E Western Europe Y/Y Change (%) 23% 22% 10% 20% 18% 15% 15% 18% 15% 16% 8% 8% 8% 8% 8% CEMEA Y/Y Change (%) 70% 35% 32% -32% 22% -25% -10% 10% 20% -5% 12% 12% 12% 12% 12% Americas Y/Y Change (%) 153% 136% 124% 70% 105% 65% 60% 55% 55% 57% 45% 45% 40% 40% 42% Asia-Pacific Y/Y Change (%) 52% 40% 117% 59% 64% 60% 60% 60% 55% 58% 20% 20% 20% 20% 20% Net Sales Y/Y Change (%) 50% 38% 39% 32% 39% 23% 24% 31% 34% 29% 21% 19% 21% 23% 21% $218.5 $61.8 Cost of Sales Gross Profit Y/Y Change (%) 48% 45% 32% 39% 40% 24% 25% 33% 36% 30% 22% 20% 22% 24% 23% Gross Margin 53.5% 53.0% 53.5% 57.3% 54.5% 54.0% 53.5% 54.0% 57.8% 55.1% 54.5% 54.0% 54.5% 58.3% 55.6% Y/Y Change (bps) (40) 230 (280) Other (Income), Net (0.0) (0.0) (0.0) (0.0) (0.1) General & Administrative % of Net Sales 10.5% 8.6% 8.3% 7.1% 8.5% 8.8% 7.7% 6.8% 6.0% 7.1% 8.6% 7.5% 6.6% 5.8% 6.9% Sales & Marketing % of Net Sales 29.3% 32.5% 30.6% 42.5% 34.3% 30.0% 32.5% 31.1% 42.5% 34.7% 29.5% 32.0% 30.6% 42.0% 34.3% Operating Income (Adjusted) Y/Y Change (%) 124% 303% 59% 15% 81% 36% 38% 44% 61% 44% 30% 30% 30% 39% 32% Operating Margin (Adjusted) 13.8% 11.9% 14.7% 7.8% 11.8% 15.2% 13.3% 16.1% 9.3% 13.2% 16.4% 14.5% 17.3% 10.5% 14.4% Y/Y Change (bps) (110) Management Fee/Other Operating Income (Reported) Interest Expense, Net (0.1) (0.4) (0.4) (0.3) (1.2) (0.2) (0.2) (0.2) (0.2) (0.8) (0.3) (0.3) (0.3) (0.3) (1.2) Other Financial Expenses 0.3 (0.3) (0.5) 0.0 (0.5) Pre-Tax Income (Reported) Income Tax Tax Rate 15.6% 15.9% 7.5% 5.4% 10.9% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% Net Income (Reported) Y/Y Change (%) 107% 138% 276% 18% 118% 60% 39% 32% 62% 45% 46% 45% 41% 56% 46% Adjustments (Net of Tax) Net Income (Adjusted) Y/Y Change (%) 141% 176% 124% 21% 95% 47% 33% 28% 49% 37% 29% 29% 29% 38% 31% Shares Outstanding (Diluted) Diluted EPS (Reported) Adjustments Diluted EPS (Adjusted) Y/Y Change (%) 59% 81% 35% 0% 34% 37% 34% 29% 44% 35% 30% 26% 28% 39% 30% EBITDA (Reported) Adj. For Discontinued & Exceptional Exp Mgmt Fees/Other Debt Conversion to Grant EBITDA (Adjusted) Y/Y Change 107% 118% 78% 13% 67% 52% 38% 46% 50% 46% 28% 27% 28% 35% 30% EBITDA Margin 15.0% 14.5% 16.9% 10.5% 14.1% 18.6% 16.2% 18.8% 11.7% 16.0% 19.7% 17.3% 19.9% 12.9% 17.1% Y/Y Change (180) Exchange Rate ($/Euro) $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 (In $ millions) Net Sales $64.0 $69.1 $75.7 $85.7 $289.0 $72.0 $85.3 $99.4 $115.1 $371.9 $87.1 $101.7 $120.5 $142.1 $451.4 Y/Y Change (%) 63% 38% 33% 32% 39% 13% 24% 31% 34% 29% 21% 19% 21% 23% 21% Gross Profit $34.2 $41.0 $40.5 $49.1 $157.5 $38.9 $45.6 $53.7 $66.6 $204.9 $47.5 $54.9 $65.7 $82.9 $251.0 Operating Income (Adjusted) $8.8 $9.2 $11.2 $6.7 $34.1 $10.9 $11.3 $16.0 $10.8 $49.1 $14.3 $14.7 $20.9 $15.0 $64.9 EBITDA (Adjusted) $9.6 $11.3 $12.8 $9.0 $35.3 $13.4 $13.8 $18.7 $13.5 $54.2 $17.2 $17.6 $24.0 $18.3 $76.2 Y/Y Change (%) 127% 144% 70% 13% 75% 39% 23% 46% 50% 53% 28% 27% 28% 35% 41% Net Income (Adjusted) $7.5 $8.8 $11.5 $6.7 $32.9 $10.1 $10.5 $14.7 $10.0 $45.2 $13.1 $13.5 $19.0 $13.7 $59.2 EPS (Adjusted) $0.35 $0.38 $0.54 $0.32 $1.60 $0.48 $0.51 $0.70 $0.47 $2.15 $0.62 $0.64 $0.90 $0.65 $2.80 Y/Y Change (%) 59% 81% 35% 0% 34% 37% 34% 29% 44% 35% 30% 26% 28% 39% 30% Free Cash Flow ($5.2) ($1.7) ($11.3) ($8.7) ($26.9) $20.5 $3.1 ($0.3) ($12.6) $10.6 $15.4 $9.9 $8.0 ($5.2) $28.2 Modified Free Cash Flow $6.1 $6.5 $4.7 $4.4 $20.1 $6.1 $5.3 $8.4 $2.4 $22.1 $11.6 $11.3 $16.0 $9.9 $48.9 Source: company reports and Oppenheimer & Co. estimates 4

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6 Investment Thesis Our Outperform rating on the shares is based on our view that SODA's position as the leader in the burgeoning home beverage carbonation market should afford it significant growth opportunities in the coming years, particularly in the US, the world's largest soft drink market and one in which SODA is meaningfully underpenetrated. In addition, we believe the premium valuation for the shares is justified by this growth opportunity, while on a price-to-earnings-growth (PEG) basis the shares appear reasonably priced. Price Target Calculation We derive our 12- to 18-month target price of $55 through a five-year discounted cash flow valuation, using a weighted average cost of capital (WACC) of 12.2% and a 3.0% residual growth rate of our terminal (2016) unlevered free cash flow estimate of 93 million, while employing a euro-us dollar exchange rate of $1.30. Key Risks to Price Target The greatest risk to the SODA story, in our view, is the company's ability to successfully penetrate the US market, which will require a change in behavior on the part of consumers, as well as significant investments in marketing and infrastructure. Even if SODA is successful in executing its US growth strategy, the company will likely attract competitors, which could mitigate growth. Important Disclosures and Certifications Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report.the author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. 6

7 Rating and Price Target History for: (SODA) as of /13/10 I:O:$40 03/01/11 O:$48 04/25/11 O:$50 05/18/11 O:$60 07/28/11 O:$80 08/12/11 O:$65 11/10/11 O:$ Created by BlueMatrix All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: Outperform(O) - Stock expected to outperform the S&P 500 within the next months. Perform (P) - Stock expected to perform in line with the S&P 500 within the next months. Underperform (U) - Stock expected to underperform the S&P 500 within the next months. Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest. Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008: Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector. Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere. Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group. 7

8 Distribution of Ratings/IB Services Firmwide IB Serv/Past 12 Mos. Rating Count Percent Count Percent OUTPERFORM [O] PERFORM [P] UNDERPERFORM [U] Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Company Specific Disclosures In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for SODA. Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from SODA. In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for SODA. In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from SODA. Oppenheimer & Co. Inc. makes a market in the securities of SODA. Additional Information Available Please log on to or write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc transacts Business on all Principal Exchanges and Member SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, 8

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