Category Close-Up: Expert Analysis - CSDs/Soda

Marty Caballero [00:07] Hey viewers, thanks for tuning in. My name is Marty Caballero. I'm the managing editor at Bevnet.com and you are tuned in to the latest episode of Category Close Up. In this episode, we're going to be focusing on the CSD and soda category, and as with all episodes, we're going to be assembling a panel. Of subject experts and analysts to dive into the business climate and market dynamics in a particular category. We'll discuss some of the current opportunities and challenges, probe some of the big questions, analyze different approaches and strategies, and generally try to give some context to what we're seeing here. So for sodas and CSDs, despite facing a variety of challenges, carbonated soft drinks continue to be a major part of Americans' overall drinking habits. According to Nielsen data, US dollar sales for CSDs rose 11% over the 52 week period ended April 24th while low calorie CSDs were up 12.4% during that time. While CSD has put up good numbers, however, the category has been outpaced by growth in sparkling waters. According to Nielsen, the sparkling flavored water segment was up 19.6% over the 52 week period. Much of that growth has come from soda drinkers looking for less sugar and cleaner ingredients, and the hard work done by independents like LaCroix and Sparkling Ice to build the category over the past decade. is now the foundation for the soda giants to stake their respective claims. Coke with Aha, Pepsi with bubbly, KDP through its partnership with Massachusetts-based Polar Seltzer, as well as offerings from Nestle such as Perrier and San Pellegrino. More than simply adding flavors, brands like Spind Drift, Focus, and Limitless are reshaping sparkling water as an appealing zero calorie platform with which to integrate a range of flavor and functional experiences, all of which are setting a fast pace that CSDs are being tasked to keep up with. How are they doing that? Well, similar to sparkling water, brands operating in the traditional soda CSD space are seeking to remake the category closer to their own respective images. Function forward sodas like Poppy, Ollipop, and Pop Culture, all of which feature prebiotic fiber as a key ingredient, have given consumers a new way to look at CSDs, offering the full flavor experience plus better for you ingredients. Other companies such as Casamara Club and Dry Soda have leaned into the sober curious movement by creating sophisticated and elevated alternatives to traditional cocktails and other alcoholic drinks. And yet as these brands and entrepreneurs work to redefine the segment in contrast to the sugar heavy big brands that we all grew up with, these traditional flavors are as popular as ever. Witness the way in which next gen sparkling water brands like Ugly, Focus, as well as Poppy and Ollipop have embraced classic CSD flavor profiles like cola, cream soda, and root beer in their own skews. Certainly a lot to talk about, but that's just a little bit of what we're going to get into today. A little bit of different format, however, due to some scheduling conflicts, we weren't able to get everyone on the panel at the same time. So this one is actually going to feature two separate interviews with two separate experts. The first being Max Baumann, the founder and CEO of Basemakers, followed by an interview with Mark Murray, who's the CEO of Jones Soda. Now Max Bauman, as I said, the founder and CEO of Basemakers, a premier retail merchandizing and field sales organization focused on creating and maintaining a dominant in-store presence for food, beverage, and alcohol brands. We talked a little bit about the retail space, what things are growing, what things are contracting, the influence of sparkling water on this segment, and what the future may hold for traditional CSDs. Following that, we're going to be speaking with Mark Murray who's the CEO of Jones Soda. Now Mark has spent 38 years in the CPG industry and was recently appointed as president of Jones Soda in September 2020 before later being promoted to CEO in December 2020. We'll discuss how the brand is attempting to engage with young consumers, its pivot away from food service in the wake of challenges during the pandemic, its approach to creating flavor profiles, and why sugar reduction isn't on its radar. Thanks for tuning in and check it out. All right, so my first guest on today's episode is Max Bauman, who's the CEO of Basemakers. Max, how are you doing today?

Speaker 2 [04:09] I'm great. How are you, Marty?

Marty Caballero [04:11] I'm doing fantastic. I'm doing well. So glad to catch up with you here, and we're going to talk a little bit about this category, uh, sodas and carbonated soft drinks from kind of the retail merchandizing perspective and kind of get your expertise on that from really the, the ground, uh, the ground view to see what's going on in this category. Um, and you know, just to sort of get the ball rolling here, um, you know, obviously it's been a tumultuous year to say the least, um, but just specifically for this category, um, you know, what are some of the major things that you've seen in terms of how this category has been affected by the shutdowns and the sort of loss of foot traffic that went along with the pandemic?

Speaker 2 [04:44] So it's actually really interesting because before the pandemic everyone was looking at the traditional carbonated soft drinks and they were looking at the decline and seeing the innovation rise up and then when the shutdowns happened, obviously on-premise dropped off, people weren't going in and Using the fountain drinks anymore. However, we saw a lot of consumers going back to the brands that they know and trust and also looking for lower priced items. So we saw a spike in traditional carbonated soft drinks in the multi-pack format across retailers.

Marty Caballero [05:18] Yeah, that's really interesting. It seems like that overall that Sodas and CSD's relatively had a, had a pretty good year performance-wise. Yeah, absolutely. So as brands are facing these new kinds of challenges in the market, what are some of the things they're doing innovation wise in terms of format to sort of present their products in a way that's more appealing to consumers?

Speaker 2 [05:38] It's a great question. So in terms of format, right now, it's, it's everyone's trying to get into a mainstream category of carbonated soft drinks, but they're doing it in a new lens. They're using the word sparkling, they're using seltzer, and then from a format perspective, how do you eat a whale, right, one bite at a time. So they're starting out with a single can format and then going into 4 packs, 6 packs, and then 12 packs are primarily sold online.

Marty Caballero [06:05] So are there any particular brands that you're seeing that are sort of making the most progress at retail or sort of just being able to ride a little bit of that wave of interest and gain more space on the shelf?

Speaker 2 [06:16] Tons, tons, and I've been very impressed with Ollipop and Poppy primarily. They've been able to enter in and actually I've right before this, I looked through Poppy and I looked through Ollipop and looked at what they were using to describe on their front label. Ollipop is a sparkling tonic uh by, by their front label, and Poppy, on the other hand, writes that it's a healthy soda. So it's interesting to see the different language and to see how that affects consumer perception. Right now, what we're seeing and what we're seeing from our brand partners, we work with about 70 different brand partners, some of them in that space, and soda is a bad word, right? And, and kind of this new age, um, millennial. Gen Z, everyone wants to move away from soda, so we're starting to see more people going into that sparkling and seltzer category, even if technically they would be a soft drink.

Marty Caballero [07:13] Yeah, that's really interesting. That's something we've seen as well. I wonder, do you have any insight into how retailers are sort of interpreting that in the sense of where they're sort of merchandizing those products that may be, you know, labeled as sparkling but kind of close to a soda or sort of where those fall in the sort of geography of the store.

Speaker 2 [07:30] So earlier today I touched base with some of our regional managers and what we're seeing is they're actually putting it next to the private label soda companies of the different various retailers. So you'll see it next to Zevia, you'll see it next to their own kind of private labels. You'll see Ollipop there, you'll see Sanzo there and several other brands that are, you know, in this better for you soda category and also seltzer category.

Marty Caballero [07:58] Well, I was wondering, from your perspective, does it make sense in terms of merchandizing and shelf space to have those near each other? Are those audiences sort of bleeding into each other now, or are they kind of going in separate areas?

Speaker 2 [08:12] It's a great question, and I think right now is is. Where a lot of these brands are testing and they're getting their learnings and their findings and from our own perspective what we've seen is depending on the location and the retailer. For instance, in Los Angeles, there's a lot more education around these better for you brands, so they can be kind of placed. Next to more of those high priced items like more of like a set right over from the energy drinks and be moving very well, whereas in Texas it's a completely different story. People are still drinking higher sugar products and we're not seeing the same sort of velocity and movement there.

Marty Caballero [08:53] Certainly interesting. I mean, I think Poppy and Ollipop are great examples uh because of the, uh, you know, the functional aspect of them as well. Um, but just kind of looking at that, you know, so-called traditional CSDs and sodas, um, you know, that sort of segment. Um, you know, what are some of the things that maybe consumers are, are looking for in, in, in this type of product? Um, you know, are they looking for more function? Is there still room for that indulgent, uh, kind of, you know, sugar forward, uh, product as well? Or so what are consumers gravitating towards?

Speaker 2 [09:23] This is a really complex question if you really want to break it down and find the white space, but there's 4 main areas. It's healthy, and that goes into sugar and calorie content, and then is it all natural? Is it artificial? Uh, it goes into taste, and that's where you, you hinted at, do you go more sugar and kind of have more of that forward flavor or more juice added. And then it goes into functionality. So do you have a prebiotic soda or you just have a soda or seltzer, sparkling water, whatever they want to call it. And then the final piece, which I think is going to be the biggest piece in breaking into the mainstream is price. They can't compete dollar for dollar with The Cokes, the Pepsis of the world, so they have to have that added value proposition either through brand or through some sort of added benefit to justify that price point.

Marty Caballero [10:16] I wonder too. We've definitely seen the obviously zero calorie, zero sugar. We've seen the kind of full sugar products as well. Is there a middle ground? Is there any interest in sort of that like low calorie mid sugar count type of product, thinking of something like the suja sparkling fruit juices that we saw released last year.

Speaker 2 [10:36] Absolutely. I think right now, um, statistically we haven't, I haven't looked through the numbers and seen from the scan guns and seeing what, what kind of is being pulled, but I think that right now it's playing between 0 calories and then you're looking at, let's take if you take a spectrum and you have the 0 calories on one end and then you have a full flavored Coca-Cola on the other. There's an opportunity of what amount of sugar are you going to add in and maybe it's from a fruit juice. That goes from 0 to 5 to 10, and I think within that range, I think above 10 is where we start to see consumer drop off unless there's some sort of, you know, coconut water or functional hydration benefit beyond 10.

Marty Caballero [11:22] And I wanted to, you know, how have you seen, uh, sodas and CSDs sort of benefit or influenced at all by that rising interest in sort of that sober, curious lifestyle. I mean, obviously it's a non-alcoholic product, um, but wondering if that sort of rising interest in that segment has sort of played a part at all in the, and as you mentioned at the top sort of the, uh, the rising interest that we've seen in this category.

Speaker 2 [11:45] It's funny that you ask that question because we're working right now with one of the largest beer manufacturers in the United States, and they're looking at getting into the non-alcoholic category. And the reason why is the exact thing that you're just mentioning. Consumers are drinking less and it also is kind of Coinciding with other alternatives that are coming out in the marketplace, you're seeing the rise in different states of now cannabis being legalized and people want to feel good and they want to relieve stress. It's just a matter of the way they go about doing that. So with better alternatives to, you know, relieving that stress, whether it be a more active lifestyle, then they say, OK, how can I have this special treat. That's not just a sparkling water. And then what are those alternatives and options? And I've one brand that would be a great case study in that would be dry. And what's interesting is it was dry soda and now it's dry bubbles. So they've kind of dry bubbly. So they've completely shifted soda and pulled that out because they want to reposition themselves into being for that sober, curious movement.

Marty Caballero [12:55] I wonder as well, you know, as retailers try to, you know, fit the needs of their consumers, are we seeing, is there more opportunity? I'm not sure if you know, but is there more opportunity in that, in that sort of refrigerated cooler single serve type of product where it is that sort of immediate consumption indulgence, or is there more sort of runway for growth in the dry shelf where it's obviously a future consumption?

Speaker 2 [13:17] In terms of the full calorie. Yeah,

Marty Caballero [13:20] yeah,

Speaker 2 [13:21] I think. I think there's an opportunity in in both. I think ultimately for The full calorie, if you're looking at like a can of Coca-Cola, the original formula, I think that's starting to pull back. So it'd be interesting to see an opportunity in the white space if you have some sort of craft soda with the best ingredients, and I know that there's a few out there. What's interesting to see is Red Bull going now into creating colas again, where they discontinued it and they brought it back, so. Very curious to see on the use cases of that, and Red Bull obviously is known as a mixer as well. So I think that was one of their reasons for creating the soda category that they've kind of relaunched, but I'd be very curious to see overall. If I was starting a brand today, I wouldn't necessarily go into that with the other white spaces that are available, but I wouldn't shut the door on it.

Marty Caballero [14:22] You know, Max, what's interesting to me as well, um, we've just observed in our reporting is that um a lot of the things that people associate with the traditional sodas, uh, the caffeine content and then also the flavors themselves, um, has really been replicated by a lot of these brands um in the sparkling water space or in the sort of more functional soda space. If I'm a traditional soda brand, how do I interpret that? Does that mean that there's more interest in sort of what I'm doing, or does that mean that, you know, other people are sort of coming in and, you know, riding the wave that I've created to grow themselves?

Speaker 2 [14:54] I think competition can be a good thing because it builds the category and the category size. However, I think it puts a lot of pressure on these bigger companies, you know, the billion dollar companies to now reinnovate and say what is the competition doing. And then what are they doing different and how are they capturing these consumers away from us. So one example that I've seen going back to Poppy that they did is they've done an amazing job on social media at finding the right target market and who they want to get out to, and they did an influencer campaign. And they were getting great placement across Sprouts and visiting these Sprouts sold out. So I think for these bigger companies to figure out how can they connect with these millennials and younger generation on brand because now the brand is becoming more legacy and for them to create a product line that can refresh and re-engage the imagination and get more of the emotional need of the consumer as they approach the shelf.

Marty Caballero [16:02] For sure, yeah, I think we've seen uh in the past couple of months Pepsi has, has, uh, come up with a couple of different innovations in that sort of sparkling uh soft drink space trying to sort of open the, the category a little bit more to, to younger consumers. Um, you know, Max, just, just wrapping up here, I wonder, you know, as you go forward for the second half of this year, we're still sort of in recovery mode, obviously. What are some of the major factors or indicators that you're going to sort of be looking at and tracking um within this specific category to sort of assess how it's doing and the health of the category?

Speaker 2 [16:32] It all comes down to sales velocity for us. We're in stores every day. We visit over 3000 stores, and this year we'll complete over $250,000 250,000 dollars audits for a portfolio that will likely be over 100 brands. So across that looking. In those stores and working with the store personnel on where the velocities are, start to tell the story. So if a brand is launching in let's say New York, LA, Chicago, and you start to see velocity trends across different channels that are boom, boom, boom, you have a big indicator that this can be a nationwide brand. Um, and then the other case, you can start to see brands that might only be great in LA or great in New York, um, or great just in the channel like natural specialty and unable to break into that conventional channel. So those are the indicators that we really look at is it all comes down to velocity off shelf.

Marty Caballero [17:32] It'll be interesting to see if the next big soda brand will actually be called a soda, right?

Speaker 2 [17:38] That's the big question. Is soda a bad word now, or is soda now a sparkling or seltzer? Uh, so that's, I'm very, very curious to see how that progresses over the next 5 to 10 years.

Marty Caballero [17:53] Who's going to step up and save soda? We'll, we'll have to save that for the next episode, but Max, it was great having you here. Thanks so much for your insight and we'll talk again soon.

Speaker 2 [18:01] Talk to you again soon. Thanks for having me.

Marty Caballero [18:06] All right, I'd like to welcome our next guest in today's episode of Category Close Up, and that is Mark Murray, the CEO of Jones Soda. Mark, thank you so much for joining us today.

Speaker 3 [18:15] Oh, thank you so much for having us. We really appreciate it.

Marty Caballero [18:18] Absolutely. Well, I'm excited to talk with you about the soda category today, uh, but first, I kind of wanted to start off, um, with just kind of a look at your company. Jones. Recently had your earnings report, uh, several weeks ago. You know, what are some of the major takeaways, uh, just on, uh, from that report?

Speaker 3 [18:34] Yeah, so we finished up uh Q1, like you said, had the earnings call last week, actually. Uh, the good news for us, we had our 3rd consecutive quarter with year over year growth. Uh, we've also exceeded our internal expectations in terms of a budget that we have now for, uh, 2021. Um, the real exciting thing was the margin improvement side of our business. We improved the margin piece about 610 basis points. So it's a really great, great, uh, quarter for us in terms of the EBITDA and the margin piece of the business. The revenue side, if you looked at it, uh, versus a year ago, we're only up about 2.5%. And if you think about that number, it doesn't sound, uh, all that impressive, but Uh, we had some, some numbers in there with our food service business in there in 2019, pre-COVID, that was a very hefty number that we had to lapse. So when you backed out that piece of our business. We're actually up with double-digit growth vers a year ago. So it was another great quarter for the organization. Like I said, 3rd consecutive quarter, uh, beating a year ago, and we're feeling really good about the plan we have in place and how we'll finish out the balance in 2021.

Marty Caballero [19:53] Uh, it's great to hear about the momentum there. Well, tell me a little bit. I mean, obviously it's been a very challenging year for, for everyone in the industry. Um, you know, I'm particularly interested in what you've sort of observed on the ground with relation to the pandemic and sort of consumer attitudes towards, uh, sodas and CSDs during this time. You know, how has it been affected by the, by the slowdowns in foot traffic, the increase in sort of future consumption? What have you sort of observed on the ground?

Speaker 3 [20:18] Yeah, um, it's, it's been a wild ride for sure. I actually came over to Jones in April, or actually May of last year, um, as a consultant, and I was actually brought in to help the team write a 3-year strategic plan. So depending on where you lived in the country, you know, April, May is when things were really, really heating up regarding the pandemic, and, and we're a Seattle-based company. If you remember back, that's kind of where it all started in the nursing home in, in Seattle. But um when, when we started working on the 3-year strategic plan, our business in April and May was very, very Soft. And if you think about what was going on there, all of a sudden the pandemic became very real, right? Businesses were closing down. People were losing their jobs, cities were going into lockdown mode, right? You were able to go out just for essential things. And if you think about, depending on where you lived during that time, everybody was going to the supermarket, and that's when the hoarding started. Taking place. It was the toilet paper. It was the center aisle, it was the canned goods. It was Campbell's and Hormel were actually back on the map again, right? And everybody was kind of hoarding, not sure when they were getting back, and they were spending on essential stuff really just to feed the family at that point, right? I got to have things to feed my family. I'm not sure I'm going out next, and some people are not even sure when the next paycheck was coming. So we kind of had a really soft April and May, and then in June, we started to see things just kind of, kind of come back a little. And what was happening then, if you remember it stimulus, it was unemployment, uh, supplemental unemployment, um, people were starting to get in a little bit of rhythm around how to deal with the pandemic. Then we started seeing people come back and buying our items, and we started to see a tickup of our business. Then as things actually progress through the year and you think about people now, they're in lockdown mode, right? I haven't been on vacation. I don't really go out to eat anymore. I don't spend money at the movie theaters. I don't go to the ballpark. I'm not seeing sports, no entertainment. I think people are trying to find ways to be creative that do special things at home. And I think right then is where we started to grab a little bit of momentum. And people were thinking, if you think about Jones soda as a special treat, I'm going to bring it home, and it's Friday night at the movies with the kids or a backyard barbecue, something special, something different. So we really saw our business start to pick up in the back half of the year, let's say the last 4 months of the year. We had a really great year and actually finished the year even with those 2 or 3 months of being very, very soft in the food service business that didn't exist. We finished the year about 3.5% over the prior year. So we really bounced back there. The unfortunate thing for us and, and, and a lot of people that are in this space that have actually a retail business. In a food service business, meaning fountain or even packaged goods, our food service business, um, basically started going away in March and April, and then never came back. For the, for the entire year. It is now just starting to claw its way back to where we're seeing some of the fountain business come back and hit the books. Now, in the meantime, what we tried to do is pivot and say we do have all these packaged beverages for grab and go. We can give you cans, we can give you bottles, we can give you a lemon cocoa. We do have packaged goods as an alternative. We tried that and tried to get some momentum in there, but it didn't, it was nothing. Uh, compared to the fountain business that we were losing. So, you know, I did a, a, a nice job getting back on track with our core bottle business, had a lap and take care of the business we're living on, losing on food service, and then now we're in a place where I think we brought some new consumers to the brand. Uh, I think we brought the people back, you know, that, that remember the brand from when they were a kid, and I think we've got some really great, great momentum going into, uh, to 2021.

Marty Caballero [24:30] Now you mentioned that you know different channels that you guys are experiencing success, e-commerce club. As we step back, um, you know, from your experience and then just looking at this category as a whole, where do you sort of see maybe the prime retail opportunities for CSDs and sodas to sort of have some room to grow?

Speaker 3 [24:48] Yeah, um, so the, the channels that we, I talked about already, club is a, is a really big initiative for us. We, we really haven't done a whole lot of business in club, a little bit up in Canada, uh, a couple of regions here with, with, with one of the club, uh, channels that, that's very popular in the United States, but we need to do a much better, bigger and better job there. I mean, I think everybody knows the volume and the velocity you get. Um, if you can land the right product at the right price and the right value platform is, is, is unbelievable. So that's one of them. The other thing is, is food service. We look at food service as a real opportunity as it comes back, and not only as a fountain product, but we're trying to be really creative and think about how can we use our products and, and other, other different avenues like a slushy or a slurpee, or even like as an ingredient. Think about something at a Dairy Queen that might use a Jones Soda ingredient just in one of their LTOs or special offerings and things like that. So we're trying to be much more creative in terms of offerings and diversify those offerings against not only different channels, but different platforms within that channel. The other thing that we found out. is we call it the alternative channel, but the HomeGoods or the Tuesday mornings and uh we talked about even places like Ace Hardware, right? We have an Ace Hardware here in, in, in my city where there's like a little general store in the Ace Hardware, you know, it's just not all bolts and wrenches anymore. There's all sorts of things and um I looked at a business one time in a similar space where one of their largest customers was Tractor Supply. You know, and you don't think about these kind of things, but we're thinking, we're kicking over every rock and looking at all the different channels and, and trying to see how we really, really ignite this brand again like it did, like it was, you know, 1215 years ago.

Marty Caballero [26:44] Well, it's so interesting because you talked about it in the beginning a little bit of sort of creating that occasion and sort of what consumers are gravitating towards. You know, with the growth of, of sparkling water becoming such a big category, how have you guys sort of positioned yourself as this, you know, full sugar traditional soda. How have you sort of positioned yourself relative to those products and sort of, you know, what sort of gives you that separation or is there some cannibalization going on in terms of the, the space on the shelf?

Speaker 3 [27:12] Yeah, I, I mean, there's all sorts of sparkling waters out there and there's no doubt that they've taken shelf space. It's interesting when we looked at the club and we did all looked at all the competitive sets. There was a bunch of sparkling waters and some of them with, you know, value-added, fortified. They have vitamins and all sorts of stuff, right? You said it. Um, we, we don't shy away that we're a soda that has cane sugar and we view ourselves as a treat. A special occasion. Um, so when I first came on board, one of the things they were doing, one of the initiatives was to try to drive out calories out of some of our products, and I was, I was actually in a cutting on root beer. We have a phenomenal root beer, and so we were cutting our root beer against the competition, but we were also cutting it against our own, and we were looking at a product with, with lower calories, which is lower sugar. And it didn't deliver on the quality. It didn't deliver on the taste. And it was like, let's, let's be proud of who we are. It's an indulgent. It's a treat, and this is who we're going to be, and this is who we're going to go after. And this is what the people who grew up with us expect. People want from us. What do they want from us? They want innovation. They want bold flavors. Uh, they want products that taste great. They want things that are authentic. They want to think of themselves as being rebellious. So when you say what makes us different, we're, I don't, I don't know if we're competing with, with sparkling water. I don't think so. That doesn't keep me up at night. Um, you know, at the end of the day, you know, we have a certain demographic that we know makes sense to us, right? But more than that, I think we actually look at marketing our products almost to a mindset in a way, right? These people that want those different things that I'm talking about, authentic is something that people almost pops to their mind every time they think about our brand and our products. That's, that's fantastic. You know, how do you get people to talk about you like that? You know, rebellious is probably the old days, unique. They use unique all the time, innovative all the time, fun. These are all things that we're going to embrace, and we're going to go with, right? So we're going to keep on innovating new flavors, exciting flavors, and we're going to be in front of people on the craft soda on the innovation side, and we're going to find our own lane. Just keep on plowing down the old lane. I'm not, I don't, I don't worry about sparkling water, and I don't stay out, and I know anything that you drink and put in your mouth, I should look at that as competition, and it is. I get it. But I mean, we have to understand who we are and just be the best version of Jones that we can be in my mind.

Marty Caballero [29:50] Well, just following up on that, the positioning of the brand, um, you know, uh, people are familiar with it from, from its history, um, again, sort of nostalgic soda flavors. At the same time, we have younger consumers maybe a little bit more concerned about sugar or maybe sort of looking for other sort of, um, you know, characteristics of their beverages. How are you guys specifically looking to, you know, retain or speak to that audience, that younger audience?

Speaker 3 [30:14] Well, I'll tell you that that's a great question. I just read a really interesting article about the uh carbonate soft drink business, because I knew I was coming on to talk to you. And, you know, they've been talking about CSDs for, you know, 5 years now, how they're basically on the decline and people aren't drinking drinks with sugar. And every time I seem to do an interview, someone asked me about that, you know, what do I think about the sugar content and what am I trying to do differently? And you know, the, the, the quick answer could be, well, you know, we, we did develop a health and wellness kind of item with lemon cocoa, and we are trying to diversify the portfolio and those kind of things. No, that's true. Oh, that's true. But if you, when you step back and what, what you just said, um, and I don't know if you've seen these numbers or heard these numbers, but we did, uh, we just did a bunch of research around our consumers and, and trying to understand our true demographic and what are they looking for in a company. And one of the things the younger folks do like, they, they're not big on the big brands, right? They like small boutique craft, regional players, regional players that are tied to almost like cause marketing, which we do a phenomenal job with our labels in terms of message of hope and vote. They like. those kind of brands, the kind of brands that stand for something and are kind of like the little underdog, right? That, that's a Gen Zer. That's the profile they're looking like. But if you really step back, Martin, and think about it, and this is really why this question is, is so powerful, the Gen Z people right now are not drinking soda. They're not. They, the, the number right now is only 15% of those folks are considered carbonated soft drink, uh, drinkers, where millennials come up to the older folks. And when I say Gen Z 1624, you know, that I guess that's what we, we have as a Gen Z. The millennials, it's like 45, 50%. So these are the guys who, you know, had Jones as teenagers, now they're millennials, and we can continue to capture them, keep them engaged, but then we got to straddle this Gen Z and go after, hey, I mean, we're still this cool hip company. With some cause marketing behind it and you know, the, the little guy trying to, to attract the people who want to be authentic and inspirational and innovative and kind of, you know, go after both there. But that number when I got here, um, that, that was like, wow, because you've been hearing, you hear the soundbite, the elevator soundbite is, yes, yes, these are kind of on the decline. Everybody's looking for healthier barbecue. Yeah, OK. It's still a $40 you know, $35 billion dollar category. Someone's buying it, right? But at the end of the day, um, the young folks, they're certainly looking for something a little bit different, so.

Marty Caballero [33:03] Well, it's interesting to me as well because some of the uh sparkling waters, you know, we just talked about a minute ago, um, you know, seem to be embracing some of the kind of classic soda flavors, um, kind of the colas and the root beers and the orange sodas and things like that we've seen sort of pop up in there. Um, you know, I wonder, you know, how you guys are sort of approaching kind of like flavor innovation because obviously I know that's a big part of the brand, but it also seems like that's maybe something that consumers are gravitating towards maybe in other products, but they're sort of looking for those nostalgic flavors, those things that they remember from the full calorie products.

Speaker 3 [33:40] Yeah, I mean, we're always looking at innovation. If I, when I got to the company, the archives of flavors. That we have introduced over 20, by the way, we're on our 25 year anniversary, right? Over 20, over the 25 years is mind boggling, right? Now, some of them, some of them are, are products like we, we're going to do turkey and gravy again, right? So some of them are just a little Jonesy, build awareness, we're fun, we're cool, no one's like us, right? And then others are, our, our approach is, we want these to be great enough that when we launch them. As kind of a special release item that we want them to stay on the shelf and fight over our five core items. I mean, let's face it, we can have a portfolio of 10 items, but you're never going to get a store to take that. So really what you got to do is manage the category. You have to have innovation because that's what our customers, our consumers expect and our customers want. But our real approach is focusing on these core, making those 5 core great, then bringing them flavors all along as these special release items. Right now we have birthday cake out there, followed up by a pineapple cream that is phenomenal. And you want those things to be so good, they don't want to take them off the shelf. So, now you have, instead of 4 bottles on the shelf, you got 5, maybe 6, maybe 7. So, Our innovation does a, does a couple of things. Some of it shock value, build awareness, turkey and gravy. The other is how do we continue to fight for that space, manage our top 4 or 5 items, continue to bring stuff in that tastes great that people are going to say, I really want to keep this, but I don't have the room. Do I get rid of this? No, I can't. And then, you know, build that out like that. But um, yeah, I think we, we got some really great innovation and a very powerful team behind it.

Marty Caballero [35:33] So Mark, I know that you guys have a mixer product as well. Could you tell me a little bit of just sort of how that is maybe, you know, functioning within your portfolio? It seems like sodas and CSDs are kind of this opportunity for for that kind of sober, curious lifestyle of people looking for alternatives to alcohol, in your case, a mixer or so yes to use with alcohol, but sort of how is that sort of been a source of, you know, development for the brand?

Speaker 3 [35:58] Yeah, I mean, to your point, I mean, it, it is, obviously you can use it with alcohol, but there's also mocktails are big, right? So when we were in it, and all this is around, you think about COVID, everybody was buying one of the premium items that they went back to. It was premium liquors, right? And so we're like, we're going to have a, we're going to have a premium mixer to mix with those products. And then there's mocktails for the kids and stuff like that. So when we looked at that again, it was like, how do we get into a bigger pack size? And how do we capitalize on this whole mixer, DIY, make your drinks at home kind of thing, right? And if you go into the store and you're not in this business, you, you maybe haven't seen it, but like if you go into most retailers, they'll have a soda section, but they also have a mixer section. So we were, we were sitting there thinking like this could be fantastic. Um, this could be something that's in there all year round, right? It's going to spike probably around the holiday season. It's going to be at a different part of the store, attracting the people for a different occasion, and it really should be all incremental. And so, what's going on? Here's a trend that, you know, it's checking all the boxes. It's, it's on trend. Uh, there's no one really doing like this mixer pack. We got some great brand equity. Uh, these are great products. Maybe we do it all year around, different part of the store, different occasions. So we really thought it'd be all creative in terms of, of incremental business. So that was the thought process around that. And, and then again we piggyback on our fan favorites, which is 12 pack just for, for people who want multi-packs. But yeah, that's exactly, exactly what we were thinking. Now we've launched that. We have people that have taken it right away. We have people that are telling us what we maybe, we maybe thought, hey, it's going to come in the fall more for holiday, see how it does, and, and we'll take it from there. It also gets us into, you know, you can be in the wine shops, the liquor stores and all those kinds of things. You're on the, on the floor as a display. So we're It's very important for us to make our box look fantastic and eye catching. So we're selling like pallets at times, half pallets at times. People put it right on the floor and things like that. So that was the thought process. It's new, uh, for the organization. We have seen some incremental business. We're very high on the product as we move into the holidays and um it's kind of a wait and see.

Marty Caballero [38:25] Well, Mark, you know, finally just wrapping things up here, you know, uh, just curious as we look into the latter half of this year, just wondering what are some of the major factors or indicators that you're gonna be sort of watching, um, you know, not just with your brand but just sort of in the, in the market in the category as a whole to sort of see, you know, where we're making progress or sort of just indicators of, of how the category is doing.

Speaker 3 [38:46] Yeah, I think that our most, uh, I, I think the thing we will be looking at our biggest benchmark on, on the retail space will be ACV. And, um, you know, right now we have a lot of room to grow. Um, we are doing very well in certain pockets of the country. Um, if you go back, uh, you know, 5 years or pockets in the Midwest where we were fantastic, where we kind of fallen off. So there are areas of this country where we need to get much more, much better penetration and get that ACV back, back up.

Marty Caballero [39:18] Well, Mark, thank you so much for your time. It was really great speaking with you and catching up about Jones and, and the category. Uh, so thank you again and, uh, and we'll talk again soon.

Speaker 3 [39:27] No, thank you for having us. Uh, we really appreciate it at Jones. So you guys have a great day.