Tractor Expands Nationwide Footprint with “Cool Kids” of Food Service

As the fast casual dining industry has seen an influx of new chains with focuses on rising food trends, Tractor Beverage Co. is hoping to rise with the tide by introducing better-for-you alternatives to the traditional soda fountain.

Tractor was founded as a soda brand in 2014 by organic farmer Travis Potter and in 2017 brought on former Coca-Cola Company chief sales officer Luke Emery as CEO. In 2018, the brand launched at restaurant trade shows with a broad, multi-category portfolio of organic, non-GMO beverage products.

Currently Tractor offers various still and sparkling products, including lemonades, agua frescas, iced teas and reduced-sugar sodas. Sweetened lines contain organic cane sugar while many of the products, such as the lemonades and frescas, feature better-for-you ingredients like turmeric and apple cider vinegar. Speaking with BevNET, Luke Emery said the brand has sought to tap into rising ingredient trends in order to provide differentiated products within the food service channel, which have long been dominated by traditional soda brands.

To date, the brand has primarily targeted rising restaurant chains with menus focused on healthy or plant-based items, including Pokeworks, Umami Burger, Zoup, PLNT Burger, CaliBurger, Slapfish and LEON.

“Our goal is to align with the cool kids in the industry,” Emery said. “We’re targeting those who are looking to extend that meal experience all the way through, down to the beverages, and we’re really excited about what we’re able to provide for the industry.”

This summer, Tractor partnered with Chipotle to launch its lemonade and agua frescas in 2,600 restaurants nationwide, making it the brand’s largest (and most established) account to date. The deal includes exclusive new items for the Mexican food chain, such as organic lemonade, hibiscus lemonade, and manadarin and berry agua frescas.

According to Emery, Tractor has seen sales increase roughly 700% year-over-year in 2020, with the Chipotle deal expanding its footprint from about 300 restaurants nationwide to over 3,500. While this type of triple digit growth isn’t necessarily unusual for fast-rising startups, it is unique in that it comes in a year where the U.S. food service industry experienced a wide shutdown amid the COVID-19 pandemic — greatly impacting many beverage brands that rely on the channel — and continues to face significant headwinds as the virus continues to impact daily operations for restaurants.

As Tractor has grown through its focus on newer restaurants, leaders in the on-premise fountain space have suffered due to recent shifts in consumer behavior. The Coca-Cola Company reported in April during its Q1 earnings report that away-from-home sales fell 25% in the weeks after global lockdowns began with fountain and concentrate sales greatly impact. In July, Coke CEO James Quincey said during the company’s Q2 call that fountain sales had begun to flourish again as restaurants reopened, but did not say by how much they recovered. According to Statista, global seated restaurant sales are still down double digits year-over-year despite a slow return to growth since May.

QSR Magazine reported last month that fast casual could be the dining model best poised to succeed in a pandemic and post-pandemic environment, despite the restaurant industry facing a collective $240 billion loss for the year. The business format is currently gaining market share from consumers who are selecting delivery and takeout options over casual dining, despite the resumption of indoor seating in many states.

For Tractor, the company is focused on riding this growth trend by improving its relationships with its restaurant customers via programs that can increase sales margins. This month, Tractor launched a self-fill bottle program, which sells resealable bottles to restaurants that can be filled in advance and then sold in takeout and delivery orders. According to Emery, the initiative reduces shipping costs by only sending empty bottles but once filled the products have a shelf life of over a week. As well, the brand is offering the first 100 units to customers for free.

Emery said this model greatly increases margins for restaurants, which often operate on “razor thin” profit lines, and as a result encourages them to push Tractor as an add-on to online and phone orders.

“The most successful companies have a strong beverage program,” he said. “But when the consumer shifts from dining to delivery and takeout, you often lose those beverages and there too go all the margins. So we’re really trying to drive a solution for the industry with the self-fill bottle program, which hopefully is enabling them to recoup a lot of margins and revenue to reinvest back into their business.”

Though the company has long weighed the opportunity to launch in retail, Emery said Tractor has opted to avoid the challenges of that business model such as slotting fees and high competition.

To build brand awareness in this channel, Tractor also works closely with its restaurant partners on its marketing strategy. Though the company does have its own marketing budget, Emery said the “best way” has been to allow the restaurants to drive recognition through in-store placement and online education via websites and social media. Tractor also taps into restaurants loyalty programs, using promotional meal deals and a geofencing strategy which targets key markets and to drive consumers to stores.

“You think about the consumer’s choice at your local Whole Foods, pick your retailer, there’s nothing but choices available,” he said. “And then you go to your local restaurant and you’ve got very minimal choice. It’s the same eight flavors on the fountain machine that have been there for decades.”

Heading into 2021, Emery said Tractor aims to grow its footprint with new accounts and said the Chipotle deal will be a model going forward. He noted that because Tractor is aiming to add new products to stores, rather than replace existing brand contracts with competing beverage companies, it opens more opportunities for restaurants willing to provide their consumers with more menu options. The brand has also upgraded its bag-in-box products to traditional industry standards, which Emery anticipates will “catapult” sales of its soft drink products in the coming months.

“We get asked daily about when we’re gonna get into RTD and get into retail,” Emery said. “But we just really think our sweet spot is aligning with the food service industry, so we’re doubling down in that space and we think that’s the best use of our time and talents.”