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WIKI ANALYSIS
Jones Soda is a small beverage company with $40 million in revenue in 2007[1] and makes several lines of “new age soda” that tailors to the recent trend of using healthy and natural ingredients. New age beverages are typically beverages which have not been around for long, uses natural ingredients and flavors, and consumption of which is thought to be healthful. Jones uses pure cane sugar, which some consumers believe is healthier and better tasting than cheaper high fructose corn syrup.
Jones entered the carbonated drinks market in 2004, but lets National Beverage produce and distribute the drinks.
The company was ranked 76th on the on the FSB 100 for 2008, a collection of America's fastest growing small public companies.[2]
Overview
History
Jones Soda started out as a distributor of Arizona Iced Tea, Thomas Kemper sodas, and other beverages in western Canada. The company created and launched Jones Soda with six flavors in 1996.
In October 2004, the company entered into the carbonated soft drinks (CSD) industry through the Jones Soda line under a two-year exclusive marketing and distribution agreement with Target Corporation. The CSD industry typically includes all soda products sold in 12-ounce cans and generally compete on price. Despite slowing growth of sub-1%, this sector remained attractive due to its huge volume which is estimated at is approximately $70.0 billion in total annual sales.[3] These 12-ounce cans of Jones Pure Cane Soda line are manufactured, packed and distributed by National Beverage, following the expiration on the agreement with Target. [4] In 2007, the company also shifted from using high fructose corn syrup to using pure cane sugar, which some has a superior taste but is more expensive. [5]
Operating Metrics
Gross profits were down by 38% in 2007. This can be attributed to increased marketing costs for Jone's new canned soda product, and the transition from high fructose corn syrup to more expensive pure cane sugar.[7] Promotion and selling expenses increased 40% from 2006 to 2007 mainly due to trade promotional expenses as well as costs related to the Seattle Seahawks sponsorship agreement, which includes exclusive beverage rights for certain soft drinks as well as signage, advertising and other promotional benefits. [8] In addition, general and administrative expenses for 2007 increased by 87% due to severance expenses for the termination employees, increased legal fees, negotiation costs of customer and supplier agreements, and audit and consulting fees relating to Sarbanes-Oxley compliance.
Business Segments
New Age Beverages
Jones Soda currently has six beverage brands under its new age beverage segment.
Jones Pure Cane Soda: Launched in November 1995, this line of 11 flavors comes in distinctive long-neck bottles with photos on the labels displaying urban images and is a leader in the Premium Soda (also known as all-natural soda) segment of the New Age beverage category. The changeover to pure cane soda was announced in December 2006.[9] There is also a sugar free version of the line in 5 flavors.
Jones 24C: This is an enhanced water beverage with has 100% natural flavors and contains daily vitamin requirements. The company purchased the trademark rights to 24C in June 2006 and production was began in early 2007. The drink is available in 6 flavors, either in 20-ounce PET bottles or powdered drink mix form.
Jones Organics: Jones Organics is a line of ready to drink organic tea with a mere 60 calories per serving. The line of six tea flavors is sweetened with organic cane sugar and comes in 14-ounce clear glass bottles with a fruit design on the front label.
Jones Energy: Launched in November 2001, Jones Energy is a citrus energy drink containing caffeine and other nutritional supplements such as vitamins. There are three different flavors available in two sizes, 16-ounce cans & 8.4-ounce "four-pack" carrier format.
Whoop Ass Energy Drink: Whoop Ass is another citrus energy drink containing riboflavin, niacin, vitamin B6 and thiamin. It was launched in October 1999 and is currently available in 8.4- ounce (250 ml) slim can and 16-ounce version.
Jones Naturals: Launched in April 2001, Jones Naturals is a non-carbonated beverage with 100% natural flavors and contain ingredients such as ginseng, zinc and other vitamins. They come in 20-ounce clear bottles with photograph labels similar to the Jones Soda ones and consists of six flavors. 14-ounce bottles were also introduced in 2007.
Jones GABA: Intended for introduction in the third quarter of 2008, this is a line of beverage containing a naturally produced form of amino acid which exerts a number of anti-stress effects, among other benefits.
Carbonated Soft Drinks
Jones Pure Cane Soda: The 12-ounce can format of the drink was launched in 2004.
Sales Segmentation
Sales to to the US accounted for the largest portion of revenues. With the weakening of the dollar, this might pose as a problem for the company, resulting in decreased margins and the company is currently making no efforts to hedge the foreign currency risk.
Trends & Forces
Rising costs depress margins
The company is facing increased costs in multiple areas. Co-packing and raw material costs are on the rise. The company is especially susceptible as it uses third party packers who can choose to terminate their arrangements with the company at any time. The prices of PET plastic bottles and aluminum cans increased in 2006 and again in 2007. The prices of sucrose, trays, labels and pure cane sugar also increased in 2007, and are expected to increase again in 2008.[11] These ongoing increases in production costs are expected to exert continued pressure on the company’s gross margins for 2008. It is uncertain if these increases can be passed along to the company’s customers as the different brands mainly compete on price. As costs continue to rise, the company's margins would probably continue to fall, thus affecting profitability.
Stadium and professional sports team relationships drive brand visibility
The stadium and sports team relationships offer Jones an additional opportunity to connect with its customers. As mentioned before, Jones recently acquired exclusive beverage rights for the New Jersey Nets at its new Barclays Center as well as the Seattle Seahawks at Qwest Stadium. In November 2007, the company also introduced Seahawk 12-packs (with Berry Lemonade, Cream Soda and Green Apple flavors) to Costco locations in the Northwest. Jones' fountain soda sales at the Qwest stadium are doing better than Coca-Cola's while it was the beverage provider there. These promotion and selling efforts, totalling $11,857 in 2007, are undertaken in bid to raise the profile of the brand.
Innovative new product introductions drive the Jones culture
Jones often introduces specialty beverages which are not meant to sell large quantities. These products are intended to create marketing buzz for the company. The gimmicky flavors used in limited edition variety packs helps Jones differentiate itself in a highly competitive industry and increases brand awareness. At Halloween, four-pack mini cans were introduced with Candy Corn, Gruesome Grape, Lemon Drop Dead and Strawberry Slime flavors. In addition, Turkey & Gravy Soda is now an annual item at Thanksgiving. Consumers might not drink these quirky flavors on a regular basis, but they would remember Jones and its atypical products once they have been drawn to give them a try.
Competition
Jones Soda competes mainly with Cadbury Schweppes & Thomas Kemper in the $16 billion New Age beverage industry and with Coca Cola, Hansen Natural and Pepsi, amongst others in the $70 billion carbonated soft drinks industry.
Dr Pepper Snapple Group (as the company is known, following the demerger of Cadbury Schweppes (CSG)) is third-largest refreshment beverage business in North America. As an integrated beverage business, it manufactures, markets and distributes more than 50 brands of carbonated soft drinks, juices, ready-to-drink tea, mixers and other beverages.
Thomas Kemper is a private company owned by Adventure Funds which brews mainly hand-crafted cane sugar and low calorie soda in five traditional flavors, root beer, vanilla cream, black cherry, orange cream and ginger ale.
Coca-Cola Company (KO) is the world's largest beverage company and beverages bearing its trademarks are sold in 200 odd countries. The company focuses on beverage creation and marketing. Hence, Coca-Cola manufactures the beverage base and syrups and sells them to bottling operations.
Pepsico (PEP) . is a global snack and beverage company. The company manufactures, markets and sells a variety of salty, convenient, sweet and grain-based snacks, beverages and foods. The Company is organized into four divisions: Frito-Lay North America (FLNA), PepsiCo Beverages North America (PBNA), PepsiCo International (PI) and Quaker Foods North America (QFNA). While PepsiCo manufactures and sells concentrates to bottlers, the company also produces a line of beverages like fruit juices, energy drinks, dairy-based drinks and exotic teas. [12]
Hansen Natural (HANS) develops, markets, sells and distributes alternative beverages, non-carbonated ready-to-drink iced teas, children’s multi-vitamin juice drinks, Junior Juice juices and flavored sparkling beverages under the Hansen’s brand name. In addition, it also markets several other brands of energy drinks under different brands like Monster Energy, Lost Energy and Rumba brand energy juice. As with Jones, Hansen Natural also offers a line of premium, natural cane soda.
National Beverage develops and sells flavored beverages, including soft drinks, juices, sparkling waters and energy drinks. Its flagship brands, Shasta and Faygo, have over 50 flavor varieties each. National Beverage has a unique relationship with Jones Soda. As a result of an exclusive 5-year manufacturing and distribution agreement signed in September 2006, National Beverage produces and sells the 12-ounce canned Jones Soda and 16-ounces canned Jones Energy with the concentrate purchased from Jones. Sales efforts, marketing, advertising and promotion of Jones Soda remains the responsibility of Jones.
Cott Corporation is a non-alcoholic beverage company and a provider of retailer brand soft drink. In addition to carbonated soft drinks, the company’s product lines include clear, still and sparkling flavored waters, juice-based products, bottled water, energy drinks and ready-to-drink teas. Unlike Jones, Cott Corporation also manufactures private label soda for its various customers.
| In millions of USD | Jones | Coca Cola | Pepsico | Hansen | National Beverage | Cott |
| Total Revenue | 40 | 30,133 | 40,457 | 951 | 554 | 1,766 |
| Operating Income | (14) | 8624 | 7962 | 32 | 32 | 19 |
| Net Income | (16) | 6177 | 5496 | 47 | 23 | (98) |
| Return on Average Assets | (35.4%) | 15.5% | 17.4% | 33.2% | 10.4% | (8.4%) |
| Return on Average Equity | (42.0%) | 30.9% | 35.4% | 45.2% | 15.4% | (21.7%) |
| Employees | 82 | 90,500 | 185,000 | 448 | 1,300 | 2,991 |
References
- ↑ You must specify title = and url = when using {{cite web}}..
- ↑ FSB rankings, CNN
- ↑ Jones 2007 10-K Pg 2
- ↑ Jones 2007 10-K Pg 16
- ↑ Jones 2007 10-K Pg 19
- ↑ Jones 2007 10-K
- ↑ Jones Soda goes Flat, Forbes
- ↑ Jones 2007 10-K Pg 39
- ↑ Jones Soda will switch to Pure Cane Sugar, seattlepi
- ↑ Jones 2007 10-K
- ↑ Jones 2007 10-K Pg 19
- ↑ Co Website
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