Detailed Analysis of Jones Soda's Innovation

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WHAT IS JONES SODA?
Jones Soda Co., incorporated in December 1986, develops, produces, markets and distributes alternative or New Age beverages. New Age or alternative beverages are distinguishable from mainstream carbonated soft drinks in that they tend to contain less sugar, less carbonation and natural ingredients. The Company's main product lines include brands, such as Jones Soda Co.; Jones Naturals, a non-carbonated juice and tea; Jones Energy, a citrus energy drink, and WhoopAss, a citrus energy drink. These products are sold in 39 states in the United States and seven provinces in Canada, primarily in convenience stores, delicatessens, sandwich shops and selected supermarkets, as well as through national accounts with several retailers. During the year ended December 31, 2003, sales in the United States represented approximately 86.5% of total sales, while sales in Canada represented approximately 13%, and the Company had approximately 0.5% in other international sales.

In 2003, Jones Soda launched its direct-to-retail business strategy as a complementary channel of distribution, targeting large national retail accounts. Through these programs, the Company negotiates directly with retailers in the United States, primarily foodservice-based businesses, to carry its products and that are serviced by the retailer's appointed distribution system. During 2003, Jones Soda entered into distribution arrangements with Barnes & Noble, Panera Bread Company and CostPlus World Markets to carry certain of its products in their stores nationwide in the United States. In addition, in March 2004, the Company entered into a distribution arrangement with Starbucks Coffee Company for two flavors of the Jones Soda product in all of its stores in the United States. This distribution arrangement with Starbucks in the United States is in addition to the Company's existing arrangement for their stores in Canada that has been in place since 1999.

Jones Soda

The Company originally launched Jones Soda in November 1995. As of December 31, 2003, the Jones Soda product line consists of 15 flavors: cream soda, orange and cream soda, vanilla cola, green apple soda, root beer, lemon drop soda, fufu berry Soda, cherry soda, fruit punch soda, blue bubblegum soda, crushed melon, MF grape soda, berry lemonade soda, strawberry lime soda and chocolate fudge soda.

In 2003, the Company launched a sugar-free version of the Jones Soda line. These sugar-free sodas are sweetened with splenda and have zero calories and zero carbohydrates. The sugar-free Jones Soda provides an alternative to the regular Jones Soda line and is a product extension introduction, especially in light of the recent concern and media coverage regarding obesity in young people. ...