From sip to gulp, craft soda grows
Limited runs, creative tastes and premium ingredients help makers capture share
You might expect to detect the hints of lavender, juniper or hibiscus in bath soap or potpourri, but not in your soft drink.
But it’s these unique formulations that are at the heart of the growing segment of “craft soda,” fizzy concoctions that are starting to make an impact in the $52.5-billion (U.S.) American soft drink market.
With traditional colas and other soft drinks under attack by nutritionists, craft soft drinks — also known as artisanal, specialty or small-batch soda — are capturing share by hyping premium and natural ingredients, creative flavours, limited runs, unusual packaging or their local roots.
Smaller bottlers are borrowing a page from craft beer brewers, which grew from grassroots to collectively become a major factor in an industry dominated by giants such as Anheuser-Busch InBev and SABMiller, and helped spark the brew-pub movement that has revitalized the bar business.
When it comes to craft sodas, CocaCola and Pepsico have not only taken notice, they have created their own portfolios to compete right along with the smaller players.
Craft-soda volume grew 5 per cent in 2016 to 88.8 million gallons, compared to the year before, at a time when the rest of the carbonated beverage industry was down 0.85 per cent, according to Beverage Marketing, a consulting and research company.
Craft soda reached $541 million wholesale in 2016, up from $427.7 million in 2011.
Adding to the froth: Craft soft drinks attract affluent millennials who don’t want to be seen as following the crowd with traditional soft drinks.
“When you pick up a craft soda, you’re saying something about yourself. You identify with the qualities of that beverage. If you pick up a craft soda or beer, you’re saying, ‘I’m looking for something better, more natural, more conscious of the environment,’ ” said Michael Bellas, chairperson of Beverage Marketing. “This has some legs. It has some good growth ahead of it. This is where the consumer is.”
Some of the better-known craft brands are publicly traded, such as Seattle-based Jones Soda and Los Angeles-based Reed’s, though there are also many small-batch producers such as Brooklyn Soda Works in New York, Dry Sparkling in Seattle, Cool Mountain Beverages in suburban Chicago, Real Sugar Soda in the Dallas area and Cannonborough Beverage in Charleston, S.C.
Many craft brewers started in specialty stores, retailers that focus on more healthy or upscale offerings.
From there, they are moving into the mainstream. While their sales numbers don’t threaten Coke or Pepsi, they’re redefining the market.
“There’s a large trend for natural wellness and there’s a trend of gourmet food. This is the place the rubber hits the road,” said Chris Reed, founder of Reed’s. “Every industry I know has a premium category, from hotels to ice cream to cars. Soda didn’t have it. It made sense.”
But it isn’t all sugar and spice for craft soda makers. Earlier this month, Reed’s reported that it lost $2 million in the first quarter, up from a loss of $1.6 million a year ago. Its interim CEO, Stefan Freeman, told investors that the entire business is being evaluated to get back to profitability. Likewise, Jones Soda said it lost $197,000 in the first quarter, compared to a profit of $49,000 last year, due to issues involving shipments to 7-Eleven, one of its big customers.
With that top-shelf aura comes a higher price. Craft sodas can cost three times as much as a traditional one and they’re often sold in fourpacks, rather than six- or 12-packs. For instance, a four-pack of 12-ounce glass bottles of Dry Sparkling, a juniper-flavored soda, costs $5.99. But criticism about cost doesn’t really bubble to the top of the discussion because these drinks are more of a special treat to be savoured rather than a mainstream soda that’s downed by the quart to wash down dinner.
“We drink so many carbonated beverages in the U.S. I really want to create an elevated experience with unique flavours,” Dry Sparkling founder Sharelle Klaus explained. “I came up with lavender, kumquat, rhubarb. I wanted to make those fla- vours shine, so I didn’t use a lot of sugar.”
The Seattle-based company sold more than 10 million units last year and is now on some CVS shelves, she added. Pepsi got into the game in 2014 with brands like Caleb’s Kola, named after the company’s PepsiCola creator Caleb Bradham. It added Stubborn in 2015, and 1893, a reference to the year the business was founded, last year.
“We start with a consumers focus, looking at the trends, and primarily the millennial generation is looking for new taste experiences,” said Chad Stubbs, a Pepsico vice-president of marketing. “We thought it was more limited than it was because it’s working all the way from smaller places to Walmart, Dollar General and our other retail partners.”
Coca-Cola’s foray into the segment came in 2015 via its purchase of Monster Beverage’s portfolio, which included the craft soda brands Hansen’s and Blue Sky. The following year, when they debuted their new taglines, “This is What Original Tastes Like” and “Rooted in Real,” the company said, “The crafted and specialty beverage category is a fastchanging, dynamic category. We see great opportunities for growth in this emerging part of the beverage business.”
Coca-Cola declined to comment for this article.
Joey Lifschitz first discovered craft soda at a restaurant in the hip Williamsburg section of Brooklyn about two years ago and dove right into the colourful world of atypical flavours and what he believes to be taste-enhancing glass bottles.
The 42-year-old New York commercial real-estate appraiser drinks about10 a month at a cost of approximately $40.
“I love soda, for better for worse,” he said, citing pineapple and hibiscus-cinnamon-clove among his favourites. “The whole idea of craft soda is keeping it small and quality . . . When I go out, I try to look for craft sodas over Dr. Brown’s (an established soft drink brand) or a Coke, if it’s available. If I’m at a store or bodega and need a drink, I look to see if they have craft sodas.”