Andy Morton

The just-drinks Interview - Jennifer Cue, Jones Soda's CEO

By | 16 August 2013

Jones Soda was deep in the red in 2008

Jones Soda was deep in the red in 2008

Seattle's Jones Soda has been on a financial roller-coaster over the past few years. But with the group edging closer to turning a profit and costs trimmed to more manageable levels, a candid CEO Jennifer Cue tells just-drinks what went wrong, and of the new challenges facing US soft drinks firms in a changing CSD market.

Jennifer Cue wasn't there at the time, but the Jones Soda CEO has pieced the story together since returning 12 months ago to the company she helped build.

And it is a startling story - a near post-mortem of a company that from 2006 to 2008 reversed multi-million-dollar annual profits to to an even bigger loss.

“I was like, to be perfectly honest with you, what the hell happened?” Cue told just-drinks this week, a few days after the company marked its return from the brink with a close to break-even second-quarter balance sheet.

“It was a profitable company. The infrastructure was in place, the brand was on fire, and the company had just raised US$30m.”

This was 2006, the year Jones Soda posted a $4.6m profit. Sales of about $40m were further testament to a success built on a young consumer base, sugar cane instead of corn syrup and eye-catching glass bottles.

But with $30m from a stock sale in the bank, and CEO and founder Peter van Stolk determined to be a bigger player in the US soft drinks market, things started to unravel. When van Stolk stepped down in 2007 (he quit the board in 2009) and Jones went through four CEOs in five years, the unravelling intensified. In 2008, the company lost $15m. By 2011, it was still haemorrhaging cash, with losses of $7.2m.

“The first CEO (van Stolk) was all about launching products every six months, so the Jones Soda brand got less focus,” Cue says. “There was Jones Organic, Jones Gaba, Jones this, Jones that - all in different categories. The team didn't know what to focus on.

“The next CEO and most after were from big corporations such as Coca-Cola and companies used to spending a lot of money. These were all marketing executives that came into the company that knew how to spend money in corporate marketing dollars.”

Cue says the marketing men were throwing out “huge amounts of money”, writing cheques for half-a-million dollars on joint-promotions in basketball and US football. “Now that's our total corporate marketing spend,” she says.

Cue arrived back at Jones in 2011 as CFO after five years away and was installed in the CEO's seat last June when Bill Meissner quit. 

As a former CFO and COO of the company back in the good old days, and as one of the writers of its original business plan, she drew on her experience, and with the help of a few of the older hands in the company immediately cut costs.

“I knew how I ran the business before and I just wanted to take it back to that. I wanted to change back the mentality, which had gone way corporate to one that was more entrepreneurial and rewarding.”

It wasn't always easy, with staff that had been through a lot in the past few years. There was also the problem of employees sitting on large salaries, including four VPs of sales “who were making more money than I'm making right now. It just didn't make sense considering the size of the business,” says Cue. 

One of the first things Cue did as CEO was reduce the board of directors compensation and install herself on a third of the previous CEO's salary. Now, despite initial resistance, she's raising the incentives for junior sales staff that could see some of them become the company's biggest earners.

“It's been pretty satisfying to see everything come together as I had wanted to see when I came on board 12 months ago,” she says. “We've now stabilised the business and now we can start to build the brand again. There's just so much potential.”

With the fight to break-even almost won, Cue now faces another battle - against the US' contracting CSD market. Both PepsiCo and the Coca-Cola Co are successfully diversifying into juice and dairy beverages and, while sugared carbonates still make up a large bulk of sales, the soft drinks giants have embraced low-and-no calorie CSDs to an extent that they make up about half of their CSD portfolios in the US.

Cue acknowledges the trend away from full-sugar drinks but dismisses artificial sweetener aspartame, backed this week by Coca-Cola in a US print ad that tried to address health fears.

“We've never used aspartame,” Cue says. “I know that Coke and Pepsi do. They must have partnerships with aspartame because they continue to use it. We use sucralose, because we're more comfortable with that.”

In April, Jones Soda relaunched in California its lower-calorie Au Naturel line in glass bottles, ditching the PET bottles championed under the previous CEO's reign.

The drink is sweetened with a blend of pure cane sugar, agave syrup and stevia that Cue says addressed fears consumers have over artificial sweeteners. 

However, Cue says there is room in the CSD market for Jones Soda's pure cane sugar core brand.  “I still think there is an opportunity within the huge global industry considering we are so small compared to Coke or Pepsi,” she says. “We're a blip, a tiny little dot.”

A blip, maybe. But for a company that a few years ago was expected to disappear altogether, a blip is a good place to be.

Expert analysis

Successes and Failures Case Study: Jones Soda

This case study looks at how Jones Soda, a gourmet soda brand, became too ambitious and failed to stay focused on its core brand values, resulting in plummeting revenue, and ultimately the company being delisted from the NASDAQ stock market.

Sectors: HR – personnel, Marketing – advertising & promotions, Soft drinks

Companies: PepsiCo, Coke, Coca-Cola Co

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