It’s a small category, but one that has always been large when it comes to innovation. And a look at the world of gourmet CSD offerings and their ongoing evolution continues to generate excitement, if not big checks from the beverage giants.
In fact, scrutiny of the category shows that gourmet sodas are in step with many of the key consumer trends that those larger beverage companies wish they could harness themselves: healthy halos built around real sugar, all-natural ingredients, and even functionality have long been mainstay characteristics of the gourmet CSD category. But now brands in the category are going even further into emerging areas like fermentation, botanical ingredients, seasonal offerings, and an increasingly array of flavors and effects.
While sales of carbonated soft drinks have taken a sizable hit in recent years, there’s still something about the bubbles that continues to attract gourmet tastes. And boutique soda makers seem convinced they can find niche market success through unique formulations and innovative combinations.
In recent years, companies like DRY Soda, Maine Root, and Hot Lips have created diverse and lip-smacking offerings including kumquat, pumpkin pie, and cranberry flavored sodas. While quantity remains a problem, quality may still win out in the end.
One noteworthy entry into the category is Joia. The Minneapolis-based company recently introduced a line of fermented natural sodas with distinctive, mixologist-inspired flavors including Lime, Hibiscus and Clove; Grapefruit, Chamomile & Cardamom; and Pineapple, Coconut & Nutmeg. Beginning with its debut in spring of 2011, Joia has received a substantial amount of media interest and acclaim from within the beverage industry.
Carleton Johnson, one of the co-founders of Joia, said that like many entrepreneurial brands, Joia is focusing on developing a niche consumer base, though with the vast size of the carbonated beverage category, he anticipated that there would be much greater room for crossover appeal than in other beverage categories. Johnson noted that Joia was designed in the mold of an IZZE-type brand, one with a unique core message and a great tasting product that could – eventually – resonate with a mainstream audience.
To make it as a mainstream brand, Lou Ferarro, the owner of Preferred Beverage Distributors, points out that most boutique sodas will require slow growth as well as a loyal consumer base. Ferraro, whose distribution house specializes in entrepreneurial beverages, said that boutique sodas often thrive in non-traditional retail locations like cafes and hospitals, and must maintain steady growth in those types of locations best before stepping into the convenience, drug and grocery channels.
“You need to have consumers actively looking for your product before you can move on to larger retailers,” Ferraro said.
Eliciting consumer loyalty is not easy, but companies in the space have found success by shunning high fructose corn syrup in favor of real cane sugar or other natural sweeteners. Although many brands utilize a substantial amount of cane sugar to sweeten their drinks, Johnson noted that consumers see boutique sodas as a treat and, for most aficionados, the taste of real sugar trumps calorie count. More importantly, a better-tasting product means a better selling product, according to Johnson.
“If it doesn’t taste good, it doesn’t sell,” Johnson said.
Taste isn’t the only variable, however, according to Taylor Peck, the founder of San Francisco-based Taylor’s Tonics. Peck, whose company produces a variety of kettle-brewed herbal sodas, says the key to a successful boutique soda is the care and consideration of the ingredients selected.
“A genuine boutique soda can stand up to the most critical consumer,” Peck said.
Peck said he strives to achieve a low calorie count in his products, particularly as high-calorie boutique sodas do not lend themselves to mass markets – nor do they benefit consumers. Taylor’s Tonics drinks, sweetened with cane juice or in combination with erythritol, contain 100 calories or less per bottle and the company is “perpetually evaluating sweeteners.”
“We want longevity for consumers, with regular consumption, using the best ingredients,” Peck said.
In addition to premium sweeteners, Peck utilizes a range of high quality herbal and botanical extracts, including yerba mate, chai, and organic peppermint, to flavor his sodas. And while Taylor’s Tonics is a relatively small brand in a niche market, the company and several other gourmet CSD producers including Rainforest Beverages, Oogavé, and Maine Root are part of a growing number of food and beverages manufacturers using natural extracts to flavor new and existing products.
According to a recent report by market research firm Freedonia, the herbal and botanical extracts market is projected to grow by 8.9 percent annually and reach $7.3 billion in 2015. The report indicates that consumer demand is driving growth and spurring innovation in the number of foods and beverages infused with herbal and botanical extracts such as cranberry, garlic, aloe vera, flaxseed oil, and valerian root.
Peck hopes that significant growth in active probiotic, botanical, and fermented sodas will continue, using the rise in popularity of kombucha drinks as an example. While kombucha beverages had long endured disinterest and skepticism, he said, the segment has now flourished in what he called the “Age of GT’s,” referring to the popular kombucha brand. It’s Peck’s perspective that boutique sodas are now rounding that corner as a category equivalent.
But if they are, they haven’t yet found a standard-bearer like GTs. Certainly, there are established companies, like grocery stalwart Reed’s and edgy Jones Soda, but neither has managed to create a wake for other new brands to follow. In that regard, the category remains the purview of small, craft practitioners.
Nevertheless, the success of some boutique soda brands is not going unnoticed. Peck said that within the last two months, he has been inundated with phone calls from individuals interested in developing their own variety of fermented and botanical drinks.
“Something interesting is developing market-wide as we speak,” Peck said. “With the volume of credible competition [that] I know is in the works, every company launching is going to have to bring their A-game, which will inevitably push the category forward as a result of the required innovation to simply keep playing.”