PepsiCo says the emerging “craft” soda industry is a trend that’s here to stay. And what’s why the company is vowing to make a bolder investment on the category as it aims to convince millennials that soda can be a tasty (and healthier!) drink.
The food and beverage giant has confirmed to Fortune that it will begin to sell the “craft” line of Stubborn sodas at major national retailers beginning August 8. The move to bring the line of five sodas, which includes root beer and vanilla cream flavors, comes after PepsiCo (PEP) first brought the line to foodservice channels last year.
Stubborn sodas meet a few key trends that PepsiCo is aiming to address. The line of sodas is made with fair trade-certified cane sugar and doesn’t use high fructose syrup. And Stubborn’s calorie count generally ranges between 90 to 100 calories for a 12-ounce glass bottle, far fewer than the 150 calories in a similar sized bottle of Pepsi. For health-conscious millennials monitoring their calorie intake and looking closely at nutritional facts, Stubborn could help lure them back into the soda category. (An important aside: Stubborn contains Stevia).
“Consumers are changing,” says Scott Finlow, vice president of innovation and insights for global foodservice at PepsiCo. “They want quality products with different, more natural ingredients.”
PepsiCo’s bid to sell consumers on “craft” soda comes at a time when a similar movement is exploding in popularity in the beer segment and increasingly resonating in the coffee category. But for the carbonated soft drink category, “craft” sodas still represent a tiny sliver of sales, so small that major industry trackers don’t monitor the subcategory’s sales. It is also tough to define: There’s no formal, government-regulated definition as to what a “craft” soda contains. Some may be wary that it’s simply a marketing ploy.
Still, a successful launch for Stubborn could help improve soda’s image with consumers, as sales for the category have now declined for 11 consecutive years as bottled water, juices, and other drinks that are deemed “healthier” notch stronger sales. PepsiCo, Coca Cola (KO) and Dr Pepper Snapple (DPS) have all faced persistent sales challenges as consumers ditch traditional mainstream sodas for other beverages. Craft could improve their dented image.
“Craft is not a fad. It is here to stay,” Finlow says. “We think craft is a critical growth space and we hope this is something we will be talking about for years to come.”
PepsiCo has indicated that it would aim to diversify more in “premium” foods and beverages, as executives have acknowledged that consumers are willing to spend more on products they deem healthier or better tasting. Stubborn and the 1893 soda line, which also plays in the craft space, are also part of an innovation pipeline that’s critical to the company’s growth. PepsiCo last month said new products comprised about $5 billion, or 9%, of total sales.
This Fortune reporter got a sneak preview of the line, and I must confess, the two flavors I tried—Agave Vanilla Cream and Orange Hibiscus—were delicious. The price: $1.99 for a single bottle or $5.39 for a four pack—doesn’t seem like it’s too high of a barrier considering so many “healthy” juices can cost more. But because the line still contains calories, I may be hesitant to buy Stubborn regularly. When counting calories, cutting out beverages is often the easiest change to make to my diet.
Still, trimming the calorie count by about 33% is a notable achievement for PepsiCo. And it points to the Pepsi’s promise, along with other big soda makers, to cut drink calorie consumption by 20% by 2025.
“This brand is developed at a calorie level that creates more choices for our consumers,” says Finlow. “That’s part of our commitment to deliver calorie reduction across the portfolio.”