- Stevia sweetened soda brand Zevia closed a $200 million minority investment from Caisse de dépôt et placement du Québec (CDPQ), an investor that manages pension funds in Canada. Zevia said it will use the funding to pursue its global expansion strategy.
- In its announcement, Zevia noted that it selected CDPQ as its investment partner for its ability to accelerate the company's growth through expertise in asset management, international reach and a strong commitment to environmental, social and governance values.
- Soda sales have slipped year over year for over a decade, but stevia presents an opportunity for companies to redefine the product as a healthier beverage. The stevia sweetened beverage category grew by 36% in 2018. Zevia has capitalized on this better-for-you trend by steadily increasing its stevia beverage line since 2015.
Zevia has spent about a decade working to improve its portfolio to keep pace with consumers demanding better-for-you, natural beverages to replace sugary drinks. While carbonated soft drinks' volumes have been shrinking over the past several years, it remains the second-biggest beverage category in the U.S. Recently, beverage makers have focused on higher-margin small cans and new flavor innovations, which has helped sales of carbonated soft drinks hit $76 billion in 2019, the highest on record, according to Beverage Marketing Corporation.
Still, consumers are drifting toward healthier and premium-type products, a niche that Zevia serves. The innovation-focused beverage company's portfolio includes sodas, energy drinks, organic teas, mixers, sparkling water and children’s beverages available in more than 35,000 retail locations across the U.S. and Canada. In a statement on its investment in Zevia, CDPQ pointed to the beverage company's "significant and consistent growth in recent years."
Zevia is not alone in trying to reach consumers who are interested in healthier soda. Startups like Limitless, Soda Press and White Wave Soda have embraced sparkling, caffeinated beverages with an improved nutritional profile and are competing along with Zevia against the traditional soda titans. However, Zevia has more than a decade of experience creating healthy alternatives, and it makes a line of sodas with a similar flavor profile to many of the brands they are trying to replace — including Dr Zevia and a cola-flavored drink. That experience in the market gives the company an advantage over other upstarts looking to find their footing.
Zevia also explicitly promotes the inclusion of stevia in its recipes, which has helped the company ride the wave of the ingredient's growing popularity. As an alternative sweetener, the use of stevia in beverage applications has increased in recent years. In 2014, Coca-Cola introduced Coke Life, a stevia- and sugar-sweetened soda, and planned a reformulated version for 2018. In 2014, PepsiCo introduced Pepsi True to the U.S. But many stevia beverages have struggled since some consumers claim it can have a bitter aftertaste, causing manufacturers to work to improve the taste of its extracts and even pull it from drinks altogether.
Despite the trouble with its taste, stevia is an appealing solution to reduce sugar content without compromising mouthfeel and to clean up labels since some extracts can be listed as natural flavors — yet another benefit that Zevia capitalizes on with labeling that touts its "naturally sweetened" beverages.
By defining its niche through the use of a specific alternative ingredient, Zevia is tackling the market using a similar strategy to successful food brands like Banza and Caulipower that have made their name using chickpeas and cauliflowers respectively. In 2019, Banza was the fastest-growing pasta brand in the U.S. and Caulipower says it's one of the nation's best selling and fastest-growing frozen pizza brands.
With an additional $200 million at its disposal and an investor that has global connections, Zevia will continue its efforts to increase its market share by offering an alternative to consumers who continue to fall away from soda and favor better-for-you alternatives.