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SIP founder and owner, Jennifer Martin.

THE CHALLENGE

Jennifer Martin was banking on a food science degree and decades of industry experience when she launched her own line of carbonated beverages, SIP natural craft sodas.

But to break into a market which commonly requires a large capital investment, she needed to find an innovative approach to production.

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"Largely led by Coke and Pepsi, the beverage industry is based on mass scale, from bottling to packaging and labelling," she said in an interview. "I wanted to be a small, artisanal producer with the ability to experiment and make changes to my product to assure greater success."

But because she was at a mid-life stage in her career with kids heading to university, she wasn't in a position to take on a lot of risk.

Unwilling to invest large sums in a product that she couldn't guarantee would sell, she set a budget of $23,000 for her initial production run. This would pay for approximately 30,000 bottles of SIP soda.

She contacted several bottling plants in Canada and the U.S. but was unsuccessful. "Even local companies like Whistler Water had a minimum production run of two million bottles," she recalls.

Without a small-scale production solution, Ms. Martin feared she would never get her craft sodas off the ground.

THE BACKGROUND

After graduating in food science at the University of British Columbia in 1979 and earning an MBA at the Sauder School of Business in 1982, Ms. Martin pursued food product development professionally.

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In the mid-80s, she was responsible for developing Canada's first Häagen-Dazs-style ice cream bar for Dickie D's. Named 'Richard D's Ultimate Ice Cream Bar,' it helped double the sales of the company and ultimately led Ms. Martin to an international consulting career with Unilever.

Years later, she moved back to Vancouver and started a commercial water treatment company called Water Smart that inspired her to create SIP sodas in 2010.

"I thought, 'there has to be a sophisticated non-alcohol, non-pop alternative to San Pellegrino," she said.

Infusing sparkling mineral water with fresh herbs and citrus, she developed three flavours: Rosemary Lime, Lavender Lemon Peel and Coriander Orange. At 25 calories each, SIP natural craft sodas are naturally sweetened, with only a small amount of cane sugar.

To gauge the market, Ms. Martin produced her own lab samples of SIP sodas and successfully tested them with influential Vancouver restaurants like: Vij's, Brown's Social House, the Glowbal Group, Donnelly Bars, as well as independent supermarkets such as Meinhardts and Whole Foods.

But the model was not sustainable or profitable. She needed to somehow go bigger while remaining artisanal.

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THE SOLUTION

For a year, she continued her search for a bottling company that would allow her to produce small batches. Finally she found one in the Mohave Desert, Calif., which allowed her to not only to produce 30,000 bottles but also keep the product fresher, longer.

"They had the ability to flash-pasteurize, ensuring my beverages have more than a 12 month shelf-life. It was this unique combination of them being small-scale and pasteurizing that allowed me to proceed with my business and on budget," says Ms. Martin.

THE RESULT

After a year spent developing the product and finding a production solution, Ms. Martin has been operating SIP sodas for two years with her revenue doubling in the second year to $200,000.

"Although this is small, it has allowed me to be profitable and to manage risk thanks to producing small volumes of my beverage and keeping my inventory at a manageable level," she explained.

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Ms. Martin says that her artisanal approach to a beverage business has made her retail competitive and helped her to land shelf space with supermarkets such as Save On Foods, Urban Fare, Nesters and IGA. She also recently secured an additional revenue stream by arranging for SIP to be sold through food service channels like the Fairmont, Westin, Marriott and Renaissance hotels.

According to her market research: "Small is the new black." In fact, the biggest sales of her drinks come from an artisanal café in Vancouver called Meat & Bread which sells a case per day of her Rosemary Lime. From her product testing and current sales, she has found that consumers are increasingly adventurous when it comes to unusual and new flavours."

Her market growth is expanding from British Columbia into Alberta, and also into the Philippines. Ms. Martin will be introducing two new SIP flavours this fall: Cardamom Berry and Mint Lemon Balm.

Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.

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