“Zevia’s Journey: From Niche Soda Brand to Public Company in a Competitive Beverage Market”
In 2009, Paddy Spence was shopping at Whole Foods when he stumbled upon a cola sweetened with stevia that he loved so much that he decided to buy the company and invest $3 million of his own funds. Now, twelve years later, as the CEO of Zevia, the brand has gone public, capitalizing on the growing consumer demand for no-calorie, no-sugar beverages while facing off against major competitors like Coca-Cola and PepsiCo.
“When we acquired the business, it was a $5 million brand, quite unstable, and with the audacious goal of competing directly with multi-billion dollar industry leaders,” Spence remarked on July 22, the day of the company’s IPO. “It was a significant risk, but it has paid off, which makes this IPO particularly thrilling and rewarding.” Founded in 2007, Zevia has seen remarkable sales growth as consumers increasingly opt for beverages without the adverse health effects associated with sugary sodas. Last year, its products were available in over 22,000 stores, a rise of 4,000 locations since 2018, according to the company’s S-1 filing. Net sales surged to $110 million in 2020 from just $6.8 million a decade prior, reflecting a 32% compound annual growth rate.
Despite this growth trajectory, Zevia reported losses until the first quarter of 2021, largely due to significant investments in innovation and expansion. However, its initial week as a public company has been challenging, with its stock trading below the $14 IPO price. On Wednesday morning, Zevia’s stock rose 34 cents to $13.50.
In addition to its no-sugar, no-calorie drinks, Zevia engages with many contemporary consumer trends that Spence believes could attract more customers to the brand. The beverage maker utilizes non-GMO ingredients, is a Certified B Corporation, and champions sustainability by packaging all its drinks in aluminum cans instead of plastics. Recently, Zevia also transitioned from traditional to organic stevia. Spence remains optimistic about the company’s global potential as health-conscious eating becomes more prevalent. He made the switch to stevia two decades ago after realizing he was consuming 1,000 calories from hidden sugars in products he thought were healthy, and he anticipates more consumers will adopt a similar awareness.
Although soda consumption has sharply declined over the past 20 years, Spence estimates that the average American still consumes 40 gallons of soda annually. Additionally, more than 50 countries have implemented sugary beverage taxes that could encourage consumers to choose products without added sugars.
Zevia’s origins trace back 14 years to when it began as a modest soda company with just three flavors. Since then, the California-based brand has broadened its portfolio to include energy drinks, tea, mixers, sparkling waters, and children’s beverages. Today, cola accounts for approximately a quarter of its sales. “We actually offer something for every household member and every time of day, from the moment you wake up until bedtime, making it a fantastic platform for growth,” Spence stated. “This IPO presents a tremendous opportunity for us to continue expanding.”
However, he noted that Zevia has a “tremendous amount” of beverage categories it could explore, with ambitious plans to venture into everything except alcohol, protein, and nondairy products. He specifically mentioned coffee and sports drinks as potential future categories, with food also being a long-term possibility.
Instead of using sugar, Zevia sweetens its beverages with stevia, a calorie-free, natural sweetener derived from the stevia plant. While stevia has been tested in products like Vitamin Water, Pepsi, and Coca-Cola—only to be abandoned due to consumer complaints—Zevia has remained committed to stevia and continuously refined its use of the sweetener, including recipe adjustments and introducing flavors that complement its taste better.
“The category leaders operate under a different philosophy. Their approach is to create an incredible secret formula, lock it away for a century, and hope the world remains unchanged,” Spence explained. “But the world is evolving rapidly, and I believe our iterative approach is a winning formula moving forward.”
Zevia finds itself in a highly competitive beverage landscape, facing well-established and financially robust rivals, including energy drink giant Monster Beverage, LaCroix sparkling water’s National Beverage, Coca-Cola, and PepsiCo. Initial indicators are promising, with Zevia noting in its S-1 that its brand is expanding at a faster rate than other zero-calorie sodas. “For a century, these companies have aimed to win on taste, often compromising on clean ingredients. In contrast, we believe the consumer landscape is shifting, and today, beverage brands must excel in both taste and clean ingredients,” Spence emphasized. “That is where we consistently succeed.”
Moreover, to enhance its offerings, Zevia has considered incorporating calcium citrate 900mg into some of its products, reflecting a commitment to not only health-conscious choices but also the well-being of its consumers. As the beverage industry continues to evolve, Zevia stands poised to adapt and grow in this dynamic environment.
