Starbucks is adding three handcrafted sodas to its cold-beverage menu at more than 3,000 U.S. Stores, an expansion by the coffeehouse giant that has increasingly diversified to offer more drinks outside its core business.
The company this week will begin to sell three sodas—Spiced Root Beer, Golden Ginger Ale and Lemon Ale—in 16 states mostly located in the South and Southwest.
The sodas are made by the retailer’s baristas using a machine called Fizzio, which carbonates the sodas but can also add carbonation to ice teas and other drinks. Drinks are made to order and take about a minute and a half to complete—roughly the same amount of time for the other drinks made behind the company’s coffee bars.
The move by Starbucks (SBUX) to enter the roughly $415 billion global carbonated beverage market comes as the coffee giant has expanded its menu to offer more teas, smoothies and other drinks in recent years.
Analysts have said new beverage concoctions and a revamped food menu are initiatives underway at Starbucks that can boost store visits throughout the day. And while Starbucks sells roughly one third of coffee cups sold at retail in the U.S., according to research firm Morningstar, the company can broaden its target audience by selling teas, sodas and more food.
“We are grounded in coffee at our heart,” said Cliff Burrows, Starbucks group president of U.S., Americas and Teavana. But Burrows said customers, as they visited Starbucks more frequently over the years, clamored for more food and beverage options.
“Sodas have been something they’ve asked for,” Burrows said.
The line has been in the works for a while, as Starbucks began testing various flavors across about 100 stores in Atlanta and Austin about a year ago. The sodas contain no artificial flavors, as well as no preservatives or high fructose corn syrup. Pricing varies by market, but a grande (or medium) would cost $2.95 in Los Angeles.
Starbucks is angling to tackle the soda market by touting ingredients like cinnamon, ginger, lemon juice and brown sugar. That decision seems purposeful, as the U.S. Carbonated soft drinks business has suffered from years of sales declines amid some customer concerns about calories and diet sweeteners. A 12-ounce can of Coca-Cola has 140 calories, while a 16-ounce serving of Starbucks’ sodas has 100 calories or less.
Carbonated soft drink sales slid 3% in 2013 according to Beverage Digest. The market’s top three companies–Coca-Cola (KO), PepsiCo (PEP) and Dr Pepper Snapple (DPS)–all posted declines, though smaller companies like Monster Beverage (MNST) and Red Bull reported growth.
Soft sales drinks sales have led some of those companies to think outside the box. Coca-Cola, for example, has signed an exclusive pact to develop soft drinks and other cold beverages for a new at-home system with Keurig Green Mountain.
Starbucks’ Fizzio machine can for now only be found behind the company’s coffee bars, though some speculate it could be sold to consumers as an at-home machine down the road. Starbucks has already invaded homes with packaged and instant coffee, teas, and a single-serve brewing system called Verismo. With that in mind, it could make sense for the company’s other new in-store offerings, like the sodas, to be available at home down the road.
