Net Loss: Jones Soda wants out of NBA Deal

Update - March 9, 2010
Jones Soda reaches tentative deal to be acquired by Reed's- Seattle Times

Update - February 9, 2010
Alaska Air dropping Jones Soda, going back to Coca-Cola- Seattle Times

Update - December 21, 2009
Jones Soda considering $7.9 million sale to Big Red in Texas - Seattle Times

Update - September 26, 2009:
Jones Soda scales back sponsorship, sales deal with Seattle Seahawks- Seattle Times
"Jones Soda says it will no longer provide energy drinks and water at Qwest Field, and it is giving up a suite where it entertained distributors and prospective customers."

Update - April 24, 2009:
Jones Soda founder Peter van Stolk moves on to new ventures- Seattle Times

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Documents obtained by the Downtown Dispatch, the Belltown Messenger's blog, reveal that Seattle's Jones Soda Co. is attempting to terminate their marketing agreement with the New Jersey Nets, another diminishment of market share for the carbonated candy, bubble gum soda and caffeinated energy-drink powerhouse which is progressively downsizing itself out of existence.

Whose Bad Idea Was This?
Jones was launched in 1996 – you remember, the heady dotcom bubble days – by Canadian businessman Peter Van Stolk, a former ski instructor tuned in to youth culture. "Jones stays close to its 12- to 24-year-old demographic with a pair of roving RVs," Van Stolk explained to crass advertising-industry magazine Fast Company. Jones was literally built on hype, and although hype comes with an expiration date, Jones has survived; so many other bad ideas of that era – MyLackey, Kozmo, name a hundred others at your leisure – did the sensible thing and died.

In the spring of 2007 Van Stolk and other Jones board members cashed out of the company, whose stock was valued at $20 or more per share at the time; Van Stolk arranged for himself a half-million dollar severance package, to be paid out monthly until 2010.

But right here in late 2008, new Jones CEO Stephen Jones struggles to run a company that at press time was valued at 37 cents a share and has endured two rounds of layoffs in the last twelve months. Long after the unemployment benefits of recently cast off Jones employees have become bittersweet memories, Van Stolk will be getting monthly checks from Jones for more than twenty grand.

Still-unresolved shareholder lawsuits remind us to examine the question of why a person would invest his or her precious retirement nest-egg in a company whose raison d'etre is marketing quirky bottles of turkey-flavored soda pop.

Fun Ideas, and Useless
In addition to uncompelling soda flavors like Salmon Pâté and Broccoli, Jones pioneered the concept of customer customization of beverage labels – a fun idea with limited potential. You and I can create slick, personalized soda stickers on our home printers and slap them on cola bottles, but we don't because it doesn't really accomplish anything.

The "Hey kids, you're not buying hard drugs, just caffeinated sugar water with slick graphics and a guerrilla marketing juggernaut behind it" approach was a spot-on idea back when youngsters were on the prowl for new ways to squander money. But the trendy-urban-hip marketing of Jones products – where, to my mind, they play off of the drug slang "Jonesing," a well-known term for coming down off of cocaine or amphetamines – has limited relevance to the skateboarder in line at the food bank. He just doesn't want to squander his money that way so much right now.

Speaking of Squandering Money
All the world looks on the NBA as being trendy and youthful and bursting with energy, and of course Jones Soda would want to be associated with that. But in an email dated November 12, 2008, CEO Jones asks company Manager of Legal Affairs Paula McGee if she can "please study whether we can get out of this [New Jersey Nets] deal due to delays and questionable future of this project."

Seems Jones execs aren't happy with rumors that the New Jersey Nets may – against all common good sense – stay in New Jersey.

So much for the glee and optimism of a Jones press release from November 2007 announcing that they had won the rights to sell soda at the New Jersey Nets' new arena in Brooklyn, New York "when it opens in 2009." The Newark Star-Ledger now reports that the move won't happen until 2012, if ever, and that maverick Newark mayor Cory Booker is working to keep the team in town. Evidently Jones Soda paid, handsomely, for some sort of business arrangement with the Nets which would allow them to vend their soda in a stadium which may never exist, but only in a city where the Nets will never play. Different.

Jones Executive Vice President of Sales Tom O'Neil concedes, "The Nets are losing $40M a year. They aren't going to want to release us or even help us get out of the deal. They need our money. From my perspective on this we need to play hard ball and pull out based on all the changes, delays and unsupported financing ..."

Jones also has deals with the Seattle Seahawks (13-18 since the Jones deal became official on July 1, 2007) and the Portland Trail Blazers. Both teams are owned by Paul Allen, the principal developer in the South Lake Union neighborhood in which Jones is headquartered. Jones – the marketer of Whoop-Ass Energy Drink – has been cited in real estate advertising campaigns as an example of the "hip" and "eclectic" nature of the neighborhood. "This bright blue and orange building is to soda lovers what the Taj Mahal is to people who are into palaces," according to vulcanrealestate.com, evidently in all seriousness.

What a Load of Red Bull
And what of this Whoop-Ass? Could this possibly be a high-caffeine beverage marketed to young people who need rigorous amping for skateboard duties or whilst playing (skateboard-related) video games? When one considers the dozens of brands of identical chemical amping beverages competing for coveted shelf space in our marketplaces, it becomes clear that Whoop-Ass contributes absolutely nothing to the welfare of the Western world.

In November Jones sent a free case of Whoop-Ass to a soccer team in Roseville, California. That sort of marketing is probably a lot more cost-effective than signing a money-losing deal with a troubled pro basketball team. But can a company that is literally dissolving really afford to be sending out any freebies at all?

How to Amp a CEO
Oh, the pain of being the CEO of a company like Jones in a time like this, when many companies are down forty percent or more for the year and Jones is down over ninety percent.

While not busy trying to sell soda, Mr. Jones must contend with a patent-holding company suing Big Sky Brands, Inc. – the company that sells Jones-branded carbonated candy – along with Starbucks and others over the ownership of the tin packaging for the candy. On July 10, Steve Yacht of Big Sky stated, "This is an unfortunate manner in which to introduce myself, but I have some aggravating news," and notified Jones Legal Manager McGee that "Jones Soda has been named in the lawsuit. This is obviously inappropriate and we will do everything we can to make it clear that it is Big Sky Brands, not Jones, that produces and sells this product line." Big Sky reassures Jones that it is committed to covering all legal fees, but still: just more bad news and more time spent not selling the freakish turkey soda.

But it's not all bad news: Jones attorneys racked up stacks of billable hours in October sending the crazy characters at somethingawful.com a stern letter enjoining them to immediately remove the "Jones Soda Massacre" parody from their site.

And of course Stephen Jones does receive a regular paycheck, which for the time being puts him in a better position than, say, thousands of one-time Seattle-area Washington Mutual employees. So that's also good news.

Sales Reps Eat Corporate Crap
Jones sales reps don't seem to have the time or budget or predilection to eat in the establishments that might actually sell Jones Soda, the hip indie eateries that they target in their marketing. Says here that Jones reps submit countless receipts for meals at bleak, soulless corporate chains like TGI Friday's and Chili's. On September 24, Jones footed the bill for a meal of Buffalo Wings, Swiss Burgers, and seven beers at Tailgators sports bar in Derby, Connecticut. Here's a good one: someone ordered a Yuengling with their prime rib and broiled seafood combo at the Benny's Steak and Seafood in Jacksonville, Florida on September 16th. Kind of interesting: Yuengling is the oldest operating brewery in the United States, since 1829 – 167 years longer than Jones.

An unrelenting hell of industrial, hipster-free consumables: a Jack Daniel's Black and Coke at the TGI Friday's in Newburg, New York ... a mushroom burger at Chili's the next night ... creamed spinach and a chicken potpie at the Boston Market in East Brunswick, New Jersey ... a Filet o' Fish at the Newark Airport. Without a doubt, the Downtown Dispatch gets its hands on the very best Obtained Documents.

The Very Best
Drafts of legal documents obtained by the Dispatch show that Jones may be considering adding an eighth member to their board, perhaps greasing the wheels for a Depression-era fire sale. The November documents, signed by Jones' Michael M. Fleming, with Matthew Kellog and Richard S. Eiswirth, Jr. also listed, petitions for allowing Mills A. Brown to fill a new eighth position on the Jones board. We're pretty sure this is the same Mills A. Brown from the Phoenix commercial real estate company Ross Brown. Does it mean anything? Eh ... no, but I believe we are legally allowed to speculate that he's being added to the board in return for his facilitation of a sale of Jones. Maybe the doc we saw was a rough draft that went nowhere, but one thing's for sure: you can mess around with your board of directors or you can go out and sell turkey soda.

Jones can only pray to their pagan, skateboarding gods that they will soon be purchased by a soft drink behemoth which will then wisely purge "myjones.com" from the Internet and dismantle the company, thus freeing up valuable shelf space for more-deserving brands. The soda biz in 2009 is looking to be a time of brutal cutbacks and consolidation.

Invest Now in Jones Curiosities
An inventory report of all the Jones Soda branded products in stock at company headquarters includes "pole toppers, stickers, ball point pens, bottle cap magnets, posters, trucker hats, wind breakers, polo shirts, Seahawks footballs signed by Josh Brown, shoe laces" and dozens of other everyday trifles boldly affixed with the Jones Soda logo. Lots of great stuff for somebody to sell on eBay, where you can also find fun dotcom bubble items from flooz.com, kozmo.com, pets.com and so on. Good company, when it comes to bad companies.

-Alex R. Mayer

See also: The Official Jones Soda Death Watch Page