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Now Brewing: Starbucks Soda

Now Brewing: Starbucks Soda

Photograph by Brent Lewin/Bloomberg

Starbucks (SBUX) wants to know: Can it ever be more to you than coffee? And, more specifically now, could you ever love it for its soda? The company is testing three new “handcrafted sodas”—ginger ale, lemon ale, and spiced root beer—in fewer than 10 stores in Seattle. Like the chain’s other drinks, the sodas are measured and mixed to order and are customizable.

The test began about one week ago. “It is not necessarily indicative of a national rollout,” says spokesperson Lisa Passé. Still, the AP reports that analysts already are encouraged by the soda test.

A post on the blog describes how the drinks are made: “The barista poured a little [flavoring] into a special shaker, added water, and then placed it into a special machine that seemed to be simultaneously shaking it and adding CO2.” It described the root beer as “crazy good” and the ales as “a great creative idea.”

Besides the fact that people will want something cold to drink as the weather warms, a couple of things work in favor of Starbucks soda (official name TBD). First, consumers are looking for alternatives to the soda-industrial complex. The idea of “homemade” sodas is growing in popularity: Israeli home soda-machine maker SodaStream (SODA) saw its revenue increase 51 percent in 2012, to $436.3 million. Also, soda is like coffee and tea, in that it’s essentially flavored water with high margins.

Still, soda has seen better days. Sales of carbonated beverages fell 1.2 percent last year and also decreased slightly in 2011 and 2010, according to Beverage Digest. At the same time, sales of water, tea, and energy drinks have increased. And despite growing attention for small-batch, “artisanal” products, soda’s a difficult market to compete in. For example, Seattle’s Jones Soda (JSDA) has seen annual sales fall sharply, starting in 2008.

While this is only one of many tests Starbucks does in a year, and it’s still only in early test stages, it does raise questions about the company’s intentions, particularly since it’s in the equipment business now. In 2008, it acquired the Coffee Equipment Co. and its Clover brewing system. Last September it started selling Verismo single-cup coffee machines in stores and online, which brought in about $8 million in the last three months of the year. If this test is successful, could Starbucks eventually market its own soda machine? As SodaStream’s success suggests, it is a growing market.

Passé denies this. “It’s really about that refreshing cold beverage that is an extension of our current portfolio.” The company already has a line of sparkling teas at its Tazo store in Seattle. She declined to provide further details about the company’s soda test, saying she needed to “protect what they’re trying to achieve with this.”

Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

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