The deal is done. PepsiCo went and
swallowed Izze, the biggest jewel in the alternative
soda shop earlier this month.
At two million cases last year, the sale of the
sparkling juice company marks a major change
in the high-end CSD segment. Whether it’s a
validation of a growing category or the beginning
of the end remains to be seen, however.
For retailers, the $75 million purchase, on
face, shouldn’t make it any harder to get hold of
their stock of Izze – or any harder than it’s been
to get hold of to date, that is. Word from Pepsi
and Izze at the time of the sale indicated that
the Boulder-based company would be left to
maintain its own distribution network – despite
recent changes the company had been forced to
implement to increase its ability to fulfill orders.
Still, if you’re in the business of making highend
sodas – and it has been a growing business,
estimated at $495 million by Jones Soda CEO
Peter van Stolk during a recent shareholders’
meeting, you’ve either got to look at it as a positive
development, or else throw in the towel.
And soda makers are a pretty resilient bunch.
The positive spin comes from spunky fighters
like Cricket Cola’s Mary Heron, who insists
that the purchase showed larger companies
“have opened their eyes to upscale products,
ones that, like Izze, are better for you, come in a
glass bottle and have great packaging.”
But at the same time, there are fears that that
discovery is going to result in squeezed routes to
market for the products that don’t get picked up.
With the purchase of Izze, there’s bound to be a
counterstrike or two, she agrees. The question
of whether big companies like Coke or Cadbury
Schweppes will pick up more sparkling juice
companies (like Fizzy Lizzy or The Switch)
or go prospecting for more gourmet versions of
their own products (Pop Soda or Boylan’s) is
just part of what will determine the direction of
the business. The fact that there are now a couple
of clearly positioned leaders in the production of
alternative CSDs is another: in scooping up Izze,
(as well as smaller functional soda maker Airforce
Nutrisoda), Pepsi has grabbed one of the
best-known properties available, one that has a
considerable amount of marketing momentum.
The question of whether other pure carbonated
juice companies will be able to stake a
national claim has to hang heavy in the air for
those companies, as well as the retailers and distributors
who carry them. But there is nevertheless
some optimism that carbonated juice makers
will be able to take advantage of the purchase
in much the same way Monster Energy slid onto
vacant trucks after competing brand Rockstar
signed a near-exclusive distribution deal with
Coca-Cola Enterprises.
“Some of their distributors have already
been calling,” says Richard Beswick, the national
sales manager for The Switch. “They’re
worried about losing the money they’ve spent
building the brand and they want to have
something else to cover it. The same thing happened
with Snapple.”
Beswick makes it clear that he’s not concerned
that shelf space will dry up.
“If you’re in the right market, the audience
is still there,” he says. “Grocery stores are
all putting in natural sections that deal with
our product.”
“But if you’re in gourmet sodas,” he adds, “It’s
just poorly defined.”
In saying that, Beswick taps into the issues
facing the larger contingent of non-juice alternative
soda makers: some are anchored in tradition
and nostalgia, while others appeal to a new
breed of aspirational gourmets. Depending on
consumer response, the effect of the Izze purchase
on them is likely to be more tangential,
but a much larger question is the direction of
the soda category overall. While CSDs are still
the most widely purchased beverage product in
the country, they are quickly losing share overall,
leaving craft CSDs facing the prospect of
becoming a very good anachronism.
“We’re considering taking the word ‘soda’
off the (White Rock Organics) bottle,” says
Larry Bodkin, White Rock’s president. “When
we sample, people say to us, ‘I just don’t drink
soda anymore.’”
At forward-looking Jones, things have taken a
slightly less gourmet direction, as it has hooked
up with bargain soda maker National Beverage
and plans to start selling through K-Mart. Still,
K-Mart isn’t exactly Whole Foods, and Jones
seems satisfied to be a well-distributed alternative
to mainstream sodas rather than one that
stakes its claim in the high ground of gourmet
authenticity. Jones’ pipeline approach should
appeal to retailers who find their customers
overlapping with Jones’ current direction. Hansen’s,
with its re-tooled Blue Sky soda, is taking
a similar middlebrow approach, only in the
natural foods galaxy.
As for smaller producers, expect them to
keep plugging away, hoping to catch lightning
in their bottles, and then hoping to get those
bottles into your cooler. Companies like Maine
Root, GuS, Virgil’s and Cadbury’s own Stewart’s
have their own regional fan bases, and some
have built strong on-premise followings, as well.
The stronger the following, of course, the more
likely they’ll attract some attention.
For a homegrown soda maker like Cricket’s
Heron, the option of slowly, organically building
market share at a select set of retailers has
its romance; she, like many other soda makers,
are always hunting for someone new to give
them a try on their shelves.
But she recognizes that Izze’s route has its
own advantages, as well.
“Hey, that model is a good one,” Heron
says. “Acquisition is a pretty nice thing to
have happen.”
Guarana Sodas: Tiny Market Share, Growing Opportunity?
Amidst all the discussion of “energy
sodas” Vault and Mountain
Dew MDX, there is another attempt
to cross the streams of energy drinks
and sodas, only this time, it’s the
energy drinks who are trying to leap
into the CSD pool.
Products like Bawls Guarana, Sol
Maté and Golly Guarana are taking
a micro-soda approach to traditional
energy drink ingredients like the guarana
berry and yerba mate extract,
brewing these natural caffeine sources
up into CSD’s that range from 50
to 100 percent more caffeine than
your average Coke or Pepsi.
The idea is one that Pepsi actually
attempted itself prior to the energy
drink craze with a short-lived guarana
soda called Josta, which launched in
the mid-1990s. The beverage lasted
just a few years.
It might be time for a revival,
though. With the nation becoming
more caffeine-aware, the guarana
and yerba mate sodas might have
the potential to take double advantage
of that increased knowledge.
For some consumers, the idea that
they’re drinking a naturally-occurring
caffeine product would top
an artificial source. For caffeine junkies,
however, the idea that these
products actually have twice the
boost of a regular soda could be a
major attraction.
Bawls is still marketed largely as
an energy drink – and has achieved
a small level of success in that form,
making the top 20 in that category.
Sol Maté, which has high-power yerba
maté as its caffeine analog, hasn’t
quite figured out where it stands
with regard to the energy drink/CSD
divide. But both come in upscale,
design-heavy glass bottles that could
easily translate into a spot on a gourmet
soda shelf set. Golly Guarana,
with a 12 oz. can and 20 oz. bottle,
has more of a mainstream look.
The key element of success for
all three, however, is the ever-present
consumer education component.
Given the massive growth of energy
drink consumption, it’s likely that
many more consumers have consumed
guarana than could actually
discuss what it is.
“I don’t know if the benefit of guarana
is mainstreamed yet,” says Mary
Heron, CEO of Cricket Cola, a green
tea soda that spent years waiting for
that now red-hot additive to break
into the mainstream. “I have trouble
even pronouncing it.”
That might be true, but with both
guarana and yerba maté consumption
on the rise, and caffeine awareness
growing, retailers might find it to
be something worth learning.