Jones Soda Co.

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Jones Soda Co.

234 9th Avenue North
Seattle, Washington 98109
U.S.A.
Telephone: (206) 624-3357
Toll Free: (800) 656-6050
Fax: (206) 624-6857
Web site: http://www.jonessoda.com

Public Company
Incorporated: 1987 as Urban Hand Limited
Employees: 38
Sales: $20.1 million (2003)
Stock Exchanges: Over the Counter
Ticker Symbol: JSDA
NAIC: 311421 Fruit and Vegetable Canning; 312111 Soft Drink Manufacturing

Jones Soda Co. develops and markets alternative beverages under the Jones Soda Co. and WhoopAss labels. The company's Jones Soda Co. brand constitutes its main product line, composed of its selection of 15 Jones Soda Co. flavors and several product extensions of its Jones Soda Co. line, including sugar-free versions of its Jones Soda Co. line, Jones Naturals, a selection of noncarbonated juices and teas, and Jones Energy, citrus drinks competing in the energy category of the alternative beverage market. The company's WhoopAss brand, operated through a subsidiary company, also competes in the energy category of the alternative beverage market. Jones Soda Co.'s products are sold in 39 states in the United States and in seven provinces in Canada. The beverages are sold primarily through independent distributors to convenience stores, delicatessens, and supermarkets, but the company also employs a "direct to retail" business strategy, selling its beverages directly to retailers. Toward this end, Jones Soda Co. has reached agreements to sell its beverages in stores operated by Barnes & Noble, Panera Bread Company, CostPlus World Markets, and Starbucks Coffee Company.

Origins

The irreverent, visionary architect of Jones Soda's development has been its founder, an Edmonton, Alberta, native named Peter van Stolk. Van Stolk attended Grant McKewan College in his hometown, but he never completed his studies. His attention was focused elsewhere, specifically on his two chief interests: skiing and business. Van Stolk was an adept skier and spent the winter months in the Canadian Rockies, a passion he paid for by working as a ski instructor. When the snow melted, he turned to his other area of interest, business. Van Stolk's entrepreneurial bent found expression in a number of ventures, but his most resounding success was realized in his early 20s with the March 1987 establishment of Urban Hand Limited, Jones Soda's predecessor.

Founded in Edmonton, Urban Hand represented van Stolk's entry into the beverage distribution business. The business began modestly, involving not much more than van Stolk hawking beverages in Edmonton as an alternative to his job as a ski instructor. In September 1987, the business received a considerable boost to its stature when van Stolk brokered a deal with Just Pik't Juices. He obtained the rights to market and distribute the company's patented line of fresh squeezed juices throughout western Canada. As van Stolk devoted more and more of his time to running his distribution business, his efforts were rewarded with a fast-growing business, one that cemented his standing as an able entrepreneur in Canada's beverage distribution industry.

After spending roughly two years in Edmonton, van Stolk moved Urban Hand to Calgary, Alberta, in 1989. The following year, another move established the company's headquarters in Vancouver, British Columbia, putting van Stolk and Urban Hand a three-hour drive away from their future home in Seattle. His distribution business by this point was far more than a sideline venture. By 1991, the company ranked, on a per capita basis, as the largest distributor of Just Pik't Juices in North America, a distinction that fueled van Stolk's desire to greatly expand his business. He set out to acquire the distribution rights for other alternative, or "New Age," beverages, intent on developing a range of complementary product lines in the fastgrowing sector of the beverage industry. In 1992, he acquired the exclusive rights to distribute Thomas Kemper Sodas throughout all of Canada. In September 1993, he acquired the exclusive rights to distribute AriZona Iced Teas for all of western Canada. Several months later, in early 1994, van Stolk secured the distribution rights for the West End Soda Brew line of products in every Canadian province except Quebec.

From Distributor to Brand Creator in 1994

By 1994, van Stolk had established Urban Hand as a comprehensive alternative beverage distributor, but just as he completed his objective he began to pursue a new goal. He wanted to develop his own brands rather than distribute the creations of others, a desire that signaled the end of Urban Hand, the distributor, and its transformation into what eventually became Jones Soda Co. For a short period of time in the mid-1990s, van Stolk split his energies between his two areas of interest, expanding his distribution business while he worked on creating his own brands. He began working on developing his own brands in 1994, which led to the introduction of the company's first internally developed brand in March 1995, a brand of bottled water marketed as WAZU. In January 1996, van Stolk introduced his second brand, Jones Soda Co.

Although van Stolk was determined to make internally developed brands the sole focus of his business efforts, his company increased its involvement in the distribution side of the alternative beverage industry while the WAZU and Jones Soda Co. labels tested their market worth. In April 1995, the company acquired the rights to Lahaina Iced Teas and Lemonades. The following month, the company acquired the rights to distribute Odwalla's line of fresh fruit and vegetable-based beverages. After these transactions were concluded, van Stolk began to terminate the distribution agreements he had made, freeing his company to focus exclusively on creating and marketing its own brands. The company discontinued the distribution of Odwalla in February 1996, Lahaina Iced Teas and Lemonades in May 1996, Thomas Kemper Sodas in September 1996, West End Soda Brews in October 1996, and its mainstay line, Just Pik't Juices, in December 1996. By the beginning of 1997, the company, operating as Urban Juice & Soda Company Ltd., was exclusively focused on developing its own brands.

As van Stolk's career as a distributor was coming to an end, his brand-development career showed encouraging promise. The stronger of his two initial brands was Jones Soda Co., which debuted in six traditional flavors in western Canada, Massachusetts, and Washington State. Van Stolk employed unusual marketing methods to bring recognition to his sodas, putting his own coolers, each decorated with distinctive flames, in venues such as snowboarding shops, tattoo and body-piercing studios, clothing stores, and music stores. "I wanted to create a brand," van Stolk remarked in a March 2, 2001 interview with Puget Sound Business Journal, "realizing the world doesn't need another soda. I wanted to create a product that would make an emotional connection." To help make such a connection, van Stolk offered consumers the opportunity to design the labels affixed to Jones Soda Co. bottles, a marketing ploy that created a stir of interest in the new brand.

The Jones Soda Co. brand quickly caught the interest of both consumers and the press, helping van Stolk gain entry into more conventional distribution channels. The company's sodas were the subject of several New York Times articles in 1996 and 1997 and featured on the national television program NBC News Today at the end of 1997. The media attention gave van Stolk the leverage to negotiate deals with national retail chains, which greatly increased the availability of his sodas. To take full advantage of the exposure his brand was receiving, van Stolk began developing product extensions, creating spinoff brands of the Jones Soda Co. line. In June 1998, the company introduced Natural Jones Soda, a natural soda formulation that debuted in three flavors. In January 1999, the company launched Slim Jones, a line of diet sodas. Later in the year, in October, the company introduced Jones Soda WhoopAss, a citrus drink containing riboflavin, niacin, vitamin B6, and thiamin that was developed to compete in the energy category of the New Age beverage industry. (The word "Jones" was dropped from the name of the brand several months after its debut, abbreviating the brand name to "WhoopAss.")

Van Stolk's unconventional marketing tactics reached a new level in 1999, as he enhanced the interactive quality of the relationship between Jones Soda Co. and its customers. During the year, the company launched a new web site, www.myjones.com, that allowed consumers to create personalized 12-packs of Jones Soda Co. beverages. Instead of submitting a label design and hoping it would be selected by the company's staff, customers could scan their photographs through www.myjones.com and crop and create their own labels, which were down-loaded at the company's head office, packed, and shipped to the consumer.

Company Perspectives:

There's a lot more to the beverage industry than simply creating a product. At Jones Soda Co. we cover the categories with a full line of unique beverages, and the manufacturing, distribution and marketing knowledge to deliver the alternative to the mainstream. We are pioneers in the youth-oriented, New Age Beverage industry—an industry that generates almost $10 billion in annual sales—with the proven ability to develop and market products that resonate with today's image-conscious consumer. All of our unique products focus on the fast-growing 12- to 24-year-old market segment. With a current population of over 50 million people, this decidedly individualistic group spends more than $300 billion annually, and influences the spending of an even greater amount. At Jones Soda Co. we understand our customer. We share common beliefs, attitudes and vision with our target audience. Our products create an immediate connection with our consumer and allow them to play a part in everything Jones.

By the end of 1999, van Stolk's business was a recognizable, national force in the alternative beverage industry. The company's products were available in 41 states and in eight provinces in Canada. By this point, the Jones Soda Co. brand consisted of 15 flavors ranging from conventional formulations such as Orange Soda and Grape Soda to peculiar, eye-catching formulations such as Blue Bubblegum Soda and Pineapple Upside-Down Soda. In July 1999, the company forged an important relationship with Starbucks Coffee Company that put Jones Soda Co. beverages in all of the chain's stores in western Canada, an agreement that paved the way for a later agreement with Starbucks for distribution in the chain's stores in the United States.

As van Stolk's Urban Juice & Soda entered the 21st century, the company began to contend with issues stemming from its success. The early years of the new decade were devoted to reorganization and re-branding initiatives, beginning with the relocation of the company in January 2000. Urban Juice & Soda exited the 1990s deriving 84 percent of its sales from the United States, which prompted van Stolk to move the company's headquarters from Vancouver to Seattle at the start of 2000. In another move that acknowledged the primary forces that underpinned its success, the company changed its name. The Jones Soda Co. brand, including the product extensions of the company's carbonated line, generated more than 85 percent of Urban Juice & Soda's total revenues. Accordingly, Jones Soda Co. was adopted as the official corporate title of the company in August 2000.

Jones Soda Co. in the 21st Century

With a new name and a new home base, the company began working on a new product extension. In November 2000, work began on developing a new line of products to be marketed as Jones Juice. The development efforts were made public in February 2001, when the company announced that it was preparing to introduce a line of Jones Juice products in April 2001. The product line debuted with two varieties of teas and four varieties of juices that were sold in 20-ounce bottles. Featuring all natural flavors, Jones Juice beverages contained ingredients such as ginseng, royal jelly, kava kava, zinc, and valerian root.

Jones Soda Co.'s reorganization efforts were underway in the spring of 2002. One of the changes implemented involved re-branding the Jones Juice line. The name Jones Juice was dropped and replaced with Jones Naturals (the company stopped producing its original line of Natural Jones in June 2000). The change was part of a comprehensive reorganization of the company's structure that divided its operations along its two separate brands, Jones Soda Co. and WhoopAss. In March 2002, the same month Jones Juice was renamed Jones Naturals, the operation of WhoopAss became the responsibility of a subsidiary named WhoopAss USA Inc.

In 2003, Jones Soda Co. recorded a number of notable accomplishments that pointed to a promising future for the company. It recorded its first annual profit during the year, ending a string of consecutive annual losses. The company also continued to realize success in introducing new products. Jones Soda Co. introduced three new sugar-free products in September 2003—Sugar-Free Black Cherry, Sugar-Free Root Beer, and Sugar-Free Ginger Ale—but the year's most noteworthy product launch was the debut of its Turkey & Gravy Soda in the weeks leading up to Thanksgiving. The offering sold out online almost immediately after attracting attention from coast to coast. Although the interest generated by the debut of Turkey & Gravy Soda did much for Jones Soda Co.'s visibility, it over-shadowed a more meaningful development during 2003, one whose contribution to the company's growth promised a Jones Soda Co. of a much larger scale.

Van Stolk and his small group of executives began looking at a new way to distribute the company's products. They began to negotiate directly with large national retailers to carry the company's products, employing a "direct to retail" strategy. In April 2003, the company secured its first such agreement, signing a three-year deal with Barnes & Noble to carry Jones Naturals in Barnes & Noble Cafes throughout the United States. In June 2003, the company signed another lucrative contract, reaching an agreement with Panera Bread Company to sell six flavors of Jones Soda and three flavors of Jones Naturals in more than 500 of the chain's bakery-cafes. In November 2003, Jones Soda Co. signed an agreement with the 201-store CostPlus chain to carry six flavors of Jones Soda in all of the company's stores.

As Jones Soda Co. entered the mid-2000s, the increasing exposure of the company's beverages promised to deliver substantial growth in the years ahead. In March 2004, the company signed an agreement with Starbucks to carry two flavors of Jones Soda in the all of the chain's U.S. stores. In August 2004, the company completed two big deals, signing agreements with Target Corporation to carry Jones Soda in the chain's 1,275 stores and with Winn-Dixie Stores Inc. to carry seven flavors of Jones Soda in more than 1,000 stores. With these direct-to-retail agreements bringing the flavors of the company closer to a much larger percentage of the population, considerable growth seemed inevitable, particularly given the public's fascination with the concoctions dreamed up by van Stolk and his employees. The company's holiday offering at the end of 2004 did not disappoint those consumers intrigued by the introduction of Turkey & Gravy Soda. At select locations in November 2004, Jones Soda Co. offered a $15.95 six-pack containing Turkey & Gravy Soda, Cranberry Soda, Mashed Potato & Butter Soda, Fruitcake Soda, and Green Bean Casserole Soda.

Key Dates:

1987:: Peter van Stolk founds Urban Hand Limited.
1994:: Van Stolk begins to develop his own beverage brands.
1996:: Jones Soda Co. is launched, debuting in six flavors.
1998:: Natural Jones Soda is introduced.
1999:: WhoopAss, a citrus drink developed to compete in the energy category of the alternative beverage industry, is introduced.
2000:: Van Stolk moves his company from Vancouver, British Columbia, to Seattle, Washington, and renames it Jones Soda Co.
2001:: Jones Juice debuts.
2002:: Jones Juice is renamed Jones Naturals.
2003:: Jones Soda Co. begins to negotiate distribution agreements with national retailers, securing deals with Barnes & Noble, Panera Bread Company, and CostPlus World Markets.
2004:: Jones Soda Co. signs an agreement with Starbucks Coffee Company to carry two flavors of soda in all of the chain's U.S. stores.