With Fizzio, Starbucks Hopes to Become a Pop Star
Starbucks (SBUX) is expanding last year's test of handcrafted soft drinks. Fizzio -- the coffee giant's new line of carbonated beverages -- will be introduced into 3,000 stores across the Sun Belt as temperatures start to heat up.
Starbucks has done its part to branch out from warm coffees, catering to customers that want to cool down instead of heat up. There are chilled Frappuccino drinks, of course. Two years ago, it introduced Starbucks Refreshers, a line of fruity energy drinks. And patrons can always have any of the chain's signature coffee drinks served over ice. Still, there's something special about old-fashioned sodas. Starbucks knows that Fizzio could be a game changer.
Starbucks kicked things off at select stores in its home base of Seattle last year, offering golden ginger ale, spiced root beer and lemon ale. The beverages are made by hand: Baristas are armed with carbonators to fizz up still water.
The test apparently went well enough that Fizzio rolled out in Atlanta and Austin, Texas, a few months later. Now the chain is eyeing 3,000 more stores. A nationwide rollout can't be too far away.
Rolling out a new line of handmade sodas may seem like a questionable choice at a time when sugary soft drinks face a wide and growing backlash for their role the spike in childhood diabetes, but Starbucks is ahead of the curve there. Its naturally flavored sodas are being billed as a "healthy, all natural, preservative-free alternative to sugar-filled sodas."
What Starbucks apparently means by that, though, is an alternative to high-fructose-corn-syrup-filled sodas. Though it's not stated explicitly on the Starbucks website, a call to the company revealed that instead of HFCS, the new beverages are made with good old cane sugar. And, given that a 16-ounce serving of the spiced root beer packs just 100 calories -- half as much as a 16-ounce Pepsi -- we'd have to say the coffee giant is going relatively easy on the sugar.
It's hard to bet against Starbucks entering a new beverage category. Through acquisitions and its growing muscle when it comes to marketing and distribution, Starbucks has been able to make a splash in pressed juice, gourmet tea and natural energy drinks.
Hoping Fizz Doesn't Go Flat
Starbucks trademarked the Fizzio name to describe both the product line and the carbonation system last year, but recently rumors have surfaced about Starbucks taking a minority stake in SodaStream (SODA).
%VIRTUAL-article-sponsoredlinks%That chatter began in SodaStream's home turf of Israel a few weeks ago when a popular Israeli business newspaper reported that Starbucks was one of three beverage giants exploring the purchase of a piece of SodaStream. The move would follow Coca-Cola's (KO) move earlier this year in buying a 10 percent stake in Keurig Green Mountain (GMCR). If the lines are blurring between coffee and soda to the point of ownership, Starbucks can gain a foothold in this homemade soft drink space by snapping up the global leader in SodaStream. Then again, if all that Starbucks wants to do is to just start offering soda-making ammo to its troops of baristas, Fizzio would be enough.
If Fizzio is successful as a beverage line, it wouldn't be a surprise to see it showed up in canned or bottled varieties at the retail level. After all, Starbucks knows that the ability of java lovers to pick up bagged Starbucks coffee or even Starbucks in K-Cup form for Keurig single-serve coffee makers at the local supermarket isn't slowing the demand for its in-store brews.
Starbucks reported last week that comparable-store sales soared 6 percent in this country in its latest quarter. Most retail food chains struggled during the first three months of the year, but Starbucks was resilient.
It popped, financially. Now it's going to pop in an entirely new way.
Motley Fool contributor Rick Munarriz owns shares of Keurig Green Mountain and SodaStream. The Motley Fool recommends Coca-Cola, Keurig Green Mountain, SodaStream and Starbucks. The Motley Fool owns shares of Coca-Cola, SodaStream, and Starbucks and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our newsletter services free for 30 days.