Craft Soda Fizzes Into the Craft Food Mega Trend

By Amelia Levin, Foodable Industry & Research Editor

It’s no surprise traditional soft drink companies have struggled to hang on to market share as consumers look to less sugary, healthier beverage alternatives. The NPD Group has reported that soft drinks account for only 8 percent share during meals for all individuals, and that water is actually the preferred beverage, representing 46 percent of drink occasions. Technomic has also reported declines in soda consumption -- soft drink menu mentions have fallen nearly 2 percent in a recent year-over-year comparison.

Many traditional soft drinks are full of excess sugar in the form of high-fructose corn syrup, as well as preservatives and chemical colorings, and people are more concerned about that. Even diet sodas have gotten a bad rap because of the aspartame and other chemicals added. But the decline in soft drink consumption goes beyond health concerns. What started with a love of farmers’ market produce, artisan foods and craft beers has now made its way to sodas.

Millennials in particular want more “natural” soda options, and this has spurred a growth in what many refer to as a burgeoning craft soda market. According to Foodable Labs data, Millennials are consuming 4.2 craft sodas per month, an increase of 31 percent this year from the previous year.

People still want fizzy drinks apparently, but they want products made with natural and/or less processed sugars like cane sugar, and they want interesting flavor combinations but extracted from natural ingredients like fruits.

Carbonating Your Own

For restaurants wanting to get in the craft soda game, there are two paths to take: make your own, blending natural flavors with carbonated water, or buy one of the growing craft soda products on the market.

At the high-end level, many restaurants have opted to make their own sodas as part of a growing cocktail program where mixologists want more control over their mix-ins.

At Polite Provisions in San Diego, mixologist Erick Castro showcases a line of non-alcoholic, house-made sodas, including vintage classics like egg creams, fizzes and phosphates, like the pomegranate phosphate with house pomegranate grenadine, liquid acid phosphate and seltzer in a throwback to the ’50s with a modern twist. He also makes his own non-alcoholic ginger beer, with fresh-pressed ginger juice, cane sugar, lime and seltzer.

In the coffee segment, Starbucks has begun testing a line of sparkling beverages in its Seattle locations using a new Fizzio carbonation machine, Technomic noted. Inspired by classic sodas, the line includes spiced root beer, original ginger ale and lemon ale. The company has been testing sparkling iced teas, as well as sparkling green coffees naturally sweetened with fruit juice.

And fast casual has jumped on the craft soda bandwagon, with &pizza not only developing its own line of fountain-based sodas, but bottling them for enhanced store branding and as a take-out option.

“We started making craft sodas when we opened our first pizza shop three years ago,” says Michael Lastoria, co-founder and CEO of the Washington, D.C. area fast-casual pizza chain. “My passion for soda was born at an early age when as a kid and even now, I gravitate to old-fashioned sodas in bottles because they taste better and recapture the magic of old-time soda fountains and shops.”

The company started making its own syrups in-house, and then outsourced production to a local, small-batch producer that initially hooked up a bag in a box to a traditional fountain soda machine for dispensing. Currently, &pizza offers six flavors, including burdock and anise root beer; mango passion fruit; dark cherry cola; pear and fig elixir; ginger berry lemonade, and cherry bomb, which is an LTO at the moment.

Just this year, &pizza switched to another local producer to bottle its sodas and worked with its in-house design team to create the fun labels, which have a retro look that initially featured 1940s and ’50s pin-up models in a throwback to speakeasy-style culture. The company is currently going through is first run and still tweaking the labels.

“We are offering the sodas in 13 shops right now and have not yet looked into distribution, but we have been approached by other fast-casual brands and grocery stores about that possibility,” says Lastoria, noting that the bottles are available for mixing and matching in a case for takeaway to the office or home, and the carbonation lasts longer than a fountain drink.

Lastoria says customers have even used the sodas for cocktail making. Bottled sodas go for $2.75 compared to fountain drinks, priced at $2.

While the sodas still contain sugar, they contain less than most traditional soft drinks, and in the form of less processed, natural cane sugar. Natural extracts from fruits and other ingredients create the flavors. “The profile of our sodas tend to be healthier than those that are mass produced,” says Lastoria. “We’re curating an experience and everything we’re selecting is representative of what our brand standards are. Looking at soda, I wasn’t comfortable carrying a Coke or Pepsi as pairings with our pizza. We wanted to find something that was representative of the flavor and health profile of our food.”

Specialty Sodas

For many restaurants, making sodas in-house can cost time and money, but for those looking for that throwback, artisan, craft “experience,” there has been an increasing push in distribution for many craft soda companies that have existed for years.

Take Boylan Bottling Co., for example, which has been making birch beer and soda since as far back as 1891 when pharmacist William Boylan sold his medicinal blends from the back of a horse-drawn carriage up and down the streets of New Jersey. The soda has found a new liking among consumers, ranking third in consumer sentiment behind Jones and Blenheim with 87.1 points on a scale of 100, according to recent research from Foodable Labs.

Now, the company has 14 different SKUs including top sellers Black Cherry, root beer, cream soda and ginger ale (all in that order), made with natural cane sugar in small, hand-crafted batches. But just in the last couple years after a big management change, the company upped its distribution to 50 states. The main growth has been in the foodservice arena, thanks to a contract with Sysco, though many higher-end grocery stores carry the brand.

“We’re in all Ted’s Montana Grill locations, and in over 100 BurgerFi restaurants,” says Chris Taylor, senior vice president at Boylan. “We started as an LTO with Arby’s, which now carries our bottled cream soda, ginger ale and black cherry flavors.”

The soda company has also partnered with celebrity chefs Bobby Flay, Tom Colicchio, and the Voltaggio brothers to offer the soda in their high-end, independent restaurants and burger shops.

“Whether it's farm-to-table or just a search for premium ingredients, we have chefs, restaurateurs and bartenders who are looking for something that is not the standard red or blue colas,” says Taylor. “I think that you see these fantastic restaurants that can put fresh, locally sourced ingredients into a burrito or burger, and they can’t justify putting a $2.50 Diet Coke next to it.”

For many brands, the story behind the soda is just as important as the naturally made, small-batch “health halo” around it.

Similar to the craft beer industry, Boylan has been delving into seasonal creations, with a Shirley Temple flavor with natural cherry grenadine and ginger ale in the spring, sparkling lemonade in the summer, sparkling cider in the fall, and a creamy red birch beer in the winter that Taylor says “tastes like a root beer on steroids with heavier peppermint notes.”

And the company has recently partnered with a design firm and cocktail shaker maker to expand its Boylan Heritage line of tonics and other cocktail mix-ins, available for wholesale and retail as part of cocktail-making kits.

“If you look at the craft beer world, what you’re seeing is on par with what happened with the big brewing companies like MillerCoors and Budweiser seeing growing competition from smaller, independent breweries,” says Taylor. “Gone are the days when customers walk into restaurants and have two types of soda options. Customers want variety and more of an experience.”

Coca-Cola's Freestyle machine | Credit: coca-colacompany.com

Coca-Cola's Freestyle machine | Credit: coca-colacompany.com

Big Cola Companies Catch On

Soft drink giants Coca-Cola and Pepsi haven’t simply stood by and watched as the craft soda market steals more of their market share.

Coca-Cola’s first response was the Freestyle machine, which allows customers to choose from 100 beverage and optional flavor shot pairings, including many with less or no sugar.

There’s also been a growing prevalence and trend around Mexican Coca-Cola, made with natural sugar and bottled in glass. And 7Up has come out with its own retro glass bottle version reminiscent of years past.

PepsiCo also launched a machine similar to Coca-Cola’s; the Spire also features dozens of beverage options for customizing drinks. And just this year, the company has been conducting a limited test of craft sodas: Caleb’s Kola and Stubborn Soda at Panera restaurants, according to Dave DeCecco, vice president of communications at PepsiCo.

Credit: CalebsKola.com

Credit: CalebsKola.com

Caleb’s Kola is made with cane sugar and kola nut extract, while Stubborn includes six naturally-made flavors with no high-fructose corn syrup: black cherry with tarragon, root beer, lemon berry açaí, agave vanilla cream, orange hibiscus, and pineapple cream. PepsiCo has also been testing a Mountain Dew soda made with real sugar called DEWshine.

“With these new craft offerings, we are romancing the category and going back to our roots – this is not just a big company moving in on a trend,” says DeCecco. “We have been purposefully evolving our portfolio to meet changing consumer needs for more than 20 years and this is another example of that innovative spirit. We plan to keep exploring the craft and specialty soft drink space.”

In researching the craft offerings, the company talked to consumers and examined trends, finding that a growing group of consumers “are paying closer attention to the ingredients panel and wanting their foods and drinks to be made with the simplest and fewest ingredients possible,” DeCecco says. “At the same time, they want new and interesting flavor experiences. These craft offerings meet those needs.”

As Millennials, craft beer drinkers and artisan food lovers continue to look for naturally-made products with care, small-batch soda is finding a bigger space on the shelves, in the beverage coolers, and at the bars throughout all types of restaurants around the country. And there are no signs of this “movement” bubbling over.