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Can craft soda gain traction?

Craft soda is no craft beer. But that doesn’t stop large and small soda makers from copying trends in the beer industry.  Manufacturers have always monitored the alcohol industry for trends and insights, leveraging these into successes across advertising, packaging, in-store placements, and many more. Yet copying the craft beer trend will not soften soda’s continued declines.

Even if a global beverage manufacturer–Pepsi–aims to expand its footprint in the craft soda space. Will craft soda experience the success that craft beer is enjoying?

Why is Pepsi Investing in Craft Soda?

First of all, let’s define craft soda. Craft soda is loosely termed as soda produced in smaller and regional scale. Packaging tends to be more upscale (glass bottles) and the recipe has a stronger focus contains more natural ingredients. It’s because natural ingredients are more expensive to source that prevents craft soda from reaching mainstream status, distribution challenges aside.

Pepsi’s investment in craft soda is understandable. One of their marketing elements over the years has been to tap into youth, the cool factor, and living in the moment. Soda in general has declining appeal and consumers are choosing alternative refreshments. Caleb’s Kola was Pepsi’s attempt to restore the cool factor. In her own words, Pepsi’s CEO Indra Nooyi says, “I think there is actually a huge potential for craft cola.” She added that “people still love the cola taste–it’s just lost some of its cool factor and I think products like Caleb’s are bringing back some of the cool factor.”

Times Change, Consumers Change Too

Craft soda is all about the cool factor, but most consumers are not deserting soda because of the cool factor. Today’s younger consumers are more fragmented. Some people value health more and despite the great taste of cola and the natural ingredients, they opt for juices, teas, and coconut water.  Other consumers value a functional benefit, so they seek out energy drinks, enhanced waters, and sports drinks. Still some other consumers–of legal age–pick alcohol when they get together with friends. Suffice to say, there are endless options available for consumers that need a refreshment because they’re concerned about different things.

The decision process for a thirsty individual seeking a non-alcoholic beverage is different than one seeking an alcoholic beverage. For craft beer, the purchaser has already decided that they want to buy beer, not wine or hard liquor. And since craft beer exists in lagers, ales, and other variants, the purchase decision is a choice between mainstream or craft.  The decision process for craft soda is much more complicated.  The growing popularity of alternative segments indicates that interaction is high between soda and these beverage options. And after the purchaser decides on soda, there are still plenty of substitutes. Craft soda is contending with famous branded colas, diet offerings, and many flavour variants. Yes there are flavoured craft sodas, but these don’t exist for all flavours and distribution still poses a challenge.

Craft Soda Can’t Solve The Category’s Problems

Craft soda is faced with many challenges and is not a solution for the category–in the short term or the long term. The ultimate barrier to a soda purchase goes deeper than the cool factor. At its core, the category is suffering retention issues. Even if Pepsi and other manufacturers recruit consumers into craft soda, there are more consumers that leaving the category. Some people would point out this segment may help soften category declines. The fact remains that growing this segment won’t translate category growth, and further fragments the category instead.

Even though this is a valiant attempt to restore sales to the soda category, craft soda will not be like craft beer. As craft beer options  increase and generate more beer sales, expanding soda options to craft sodas will not translate the same type of success to the industry.

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