Soda sales aren’t exactly bubbling at restaurants these days. In fact, they’ve been declining for years. Despite that, there’s fizz remaining in carbonated beverages as operators look toward craft sodas, new technology, homemade beverages, and creative concoctions to put effervescence into their sparkling libations.
“We’re seeing a lot of craft soda products available in the market, although it’s still very small,” says Joe Pawlak, beverage expert and senior vice president at Chicago market research firm Technomic Inc.
Coca-Cola’s Freestyle and PepsiCo’s Spire machines, featuring dozens of beverage options, have given operators a creative way to let consumers customize their drinks, Pawlak adds, while Starbucks’ technology allows customers to choose their levels of carbonation. Operators using these new devices or offering more expensive but unique craft sodas have generally seen their beverage sales rise or remain even, he says.
Carbonated beverages make up America’s largest liquid refreshment segment, but these drinks’ total volume has contracted for nine consecutive years, according to New York–based Beverage Marketing Corp. The performance in carbonated beverages at limited-service restaurants echoes that, research from The NPD Group shows; volume slid 3 percent from September 2013 to August 2014.
There are a variety of explanations for this, says Bonnie Riggs, NPD’s restaurant analyst. “If you want to start at the industry level, one reason carbonated soft drinks are down is that [restaurants] are taking them out of kids’ meals and offering milk and other healthier options,” she says, adding that many parents won’t let their youngsters have sodas.
Health concerns over obesity and diabetes have led adults to cut back, as well, with combo meal sales dropping. And diners increasingly fail to see any price value for high-margin carbonated soft drinks, Riggs adds, especially as the price of soda has risen.
“We did a study and asked consumers why they were cutting back on sodas, and they said price was a big issue. They did not see the value,” she says. “We don’t give consumers enough credit for understanding profit margins and seeing value in what they’re buying.”
Finally, carbonated beverages are facing increased competition from other beverages, like specialty coffees, flavored iced teas, juices, bottled water, and sports drinks.
The only limited-service restaurant segment seeing increased soda growth is fast casual. Much of that is driven by the increase in the number of stores, Riggs says, although she adds that fast casuals tend to feature more diverse soda brands.
Consumers expect more from their beverages, just as they have demanded better food items from quick-service restaurant operators, says Bill Creelman, founder of Spindrift, a Boston-based craft soda maker using natural flavors and fresh ingredients. “The challenge is to get people excited about soda,” he says. “Operators have had an amazing experience on the food side, with all these great ingredients and new creations, but the beverage side at many restaurants is no different than it was 40 years ago.”
There’s been growing interest in giving some flashy pop to soda. Coca-Cola’s Freestyle launched in 2009, while Pepsi’s Spire debuted this year. Both are touch-screen soda fountains that have the capacity to pour more than 100 different beverages and flavors, allowing consumers to be their own mixologists.
Firehouse Subs was the first big operator to adopt Freestyle chain-wide. Its volumes jumped by a double-digit percentage after Freestyle was added in 2012, and the numbers have remained high. “Because of the very wide selection of carbonated and non-carbonated beverages, plus the number of diet and caffeine-free ones, we are able to meet just about everyone’s needs,” says CEO Don Fox.
The biggest increase has been in non-carbonated drinks because most are new to Firehouse Subs. But traditional soda sales are up as well, Fox adds. “One indicator was that dine-in traffic increased” 4 percentage points, bucking the trend toward takeout, he says. “When dad is asked to get subs and three or four different drinks, he’ll say, ‘Let’s just all jump in the car. I don’t want to carry all those drinks.’”
Just as importantly, the technology gives restaurants the chance to create their own beverages that they can offer alongside well-known brands. For instance, Firehouse Subs features its own custom-blended non-carbonated cherry limeade, which is second in sales to Coke. Similarly, Moe’s Southwest Grill partnered with Coca-Cola to create Vanilla at Peachtree. The Sprite or Sprite Zero–based soda has vanilla and peach flavors.
Other concepts are creating their own drinks with soda. For instance, Taco Bell developed a frozen beverage line, which included the Dr Pepper Vanilla Float Freeze, and also rolled out the Baja Blast, which was made with PepsiCo’s Mountain Dew and lime flavoring.
Some coffee and tea companies have taken this a step further and are selling only carbonated beverages made by hand in-house. Caribou Coffee is one of them. Several years ago, brand executives saw the decline in soda sales and decided to do something to change the entire carbonated beverage experience.
“It wasn’t the carbonation part bringing down sales; it was the health halo,” says company chef Mark Miller. “It was how much sugar was in these drinks that caused people to back away from them. And they were bored with the mainstream same-old, same-old things.”
He thought it would be interesting to carbonate teas and real fruit juices to give consumers an option that would match up with the company’s lunch menu. The result was the chef’s “favorite project” at Caribou, he says. During the research and development phase, two tea items rose to the top: Green Tea Lemonade, which is a version of an Arnold Palmer, and Peach Black Tea. The brand also developed Lemon Ginger Pomegranate. Following market tests, the drinks launched in spring 2012, with reduced-sugar versions added a year later.
Starbucks launched the industry’s biggest in-house soda program this year. Its Fizzio Handcrafted Sodas—created after customers said they were looking for more cold beverage options—are available in some 3,000 stores in 16 mostly South and Southwest states.
Key to the line is the Fizzio carbonation machine, which was built “from the ground up, [with Starbucks] developing the concept in-house and enlisting some of the top carbonation experts in the industry to help develop the carbonation components,” says Fizzio brand manager Joshua Fine.
Starbucks wanted the Fizzio varieties to be rooted in classic flavors but with complex, layered flavors, Fine says. The final products were Spiced Root Beer, Lemon Ale, and Golden Ginger Ale, all available with light, standard, or extra bubbles.
But offering homemade soda is not always easy. Tender Greens tested its own carbonated drinks a few years ago. The Culver City, California, restaurant chain, known for serving healthy, chef-inspired, local dishes, wanted to take that better-for-you message to its sodas, says cofounder Erik Oberholtzer. It tested making house sodas at its Hollywood location. The idea was to turn local fruit into syrup, add agave sweetening, and use soda water to “make it to order like Italian soda,” he says. “It was cleaner, more refined than anything in a commercial fountain.”
Making cola or root beer, however, takes exceptional focus and commitment. “We experimented with root beer, but couldn’t get the flavor we wanted,” Oberholtzer says. Tender Greens eventually migrated to Maine Root craft soda products, which are organic. Individual restaurant operators still have the ability to make seasonal sodas if they want from recipes already created by the company.
Portland, Oregon’s Hotlips Pizza goes a step beyond and not only makes soda, but also bottles it. The drinks feature fruit and berries from the Pacific Northwest, where “we have a temperate climate that allows the flavors to develop,” says co-owner David Yudkin. Hotlips was looking for ways to funnel more dollars to local growers when the idea of craft sodas arose. “This is the land of beer microbrewing and home brewing, and all these guys know how to carbonate,” he says. “They said it’s no problem to make soda.”
Rather than develop strong flavors like root beer, which can flavor brewing lines for days, Hotlips opted for raspberry, black raspberry, cherry, cranberry, lemon, pear, and marionberry sodas. There’s also ginger ale made with organic ginger from Hawaii. In recent years, Hotlips has even taken to mixing its various sodas with champagne to make mimosas, while it also combines lemon soda with beer for a shandy.
A number of limited-service restaurants have turned to natural specialty sodas as a way to differentiate themselves from their competitors. Craft brands like Jones, Izze, Maine Root, GuS, and Boylan dot the landscape.
Maine Root is featured at New York City–based Luke’s Lobster, which has 14 locations. “There’s quite a bit of cost differential between big and small craft soda, but Maine Root is more in line with our values,” says vice president Ben Conniff. “It’s organic and fair trade, with real ingredients, not chemicals.”
Luke’s Lobster sells a half-dozen varieties of the soda—root beer is the most popular—and sales have not shown any decline, Conniff says. “It’s a nostalgic thing. You think about going to the beach and relaxing. It recaptures that.” The chain also sells Green Bee soda, which is made with honey and botanicals.
Spindrift is focusing on more upscale limited-service brands, since those companies are more open to craft sodas.
“We’re really aligning with fast-casual restaurants, bakeries, coffee shops—those making products from scratch,” Creelman says. “Carbonation tends to increase the flavor, but in our case, too much can create almost a metallic aftertaste. We are about 10–15 percent below mainline sodas because we want the juice to soar.”
Some chefs even use carbonated beverages in their food. Biker Jim’s Gourmet Dogs in Denver employs cola in making its caramelized onion. Owner Jim Pittenger, whose concept offers a wide variety of hot dogs, says cola cuts the cooking time for the onions from an hour to about 15–20 minutes, depending on how hot the pan is. “The liquid breaks down the onions in a hurry, so throw some cola into a pan full of onions and turn the heat on high,” he says.