Monday, December 08, 2008

Citing delays, financially-troubled Jones Soda wants to pull out of Brooklyn arena sponsorship

A decline in the fortunes of Seattle-based Jones Soda and the delays in the promised Atlantic Yards arena have led Jones, which in November 2007 was announced to be the official soft drink provider at the Brooklyn arena, to explore pulling out of the deal, thus jeopardizing the planned Soda Stoop & Shoppe.

Seattle's Downtown Dispatch, which maintains an Official Jones Soda Death Watch Page, got some internal emails from the company, which has hit penny-stock territory and twice laid off people in the last year:
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.


(At right, the press release from the Nets and Forest City Ratner. Click to enlarge.)

Can they get out? $1.7M a year at stake?

The Dispatch cites an e-mail that expresses doubt that Jones can extract itself:
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 ..."

That might depend on the language of the original contract and when exactly the move was promised.

The value of the deal was never announced publicly, but Portfolio said it was $1.7 million a year.

Stock price tanking

But Jones Soda surely is suffering. In April 2007, its stock hit a record high of $32.60 after spending most of 2006 below $10. Board members sold thousands of shares while the stock was peaking, reported the Seattle Post-Intelligencer, while by 8/13/07 the stock had declined to $10.74.

When the deal with the Nets was announced 11/6/07, the stock was at $9.47. Now it's at 36 cents. (Three-year chart from MSN Money.)

The Yormark touch

A laudatory 8/24/08 USA Today article on Nets CEO Brett Yormark told the Jones Soda story:
Sealing the deal is what it's all about. "The chase is what gets me up every morning," he says. The chase is also about thinking outside the box whenever possible. When seeking out a beverage sponsor for the Barclays Center, Yormark didn't call Coca-Cola. He called Jones Soda, a little-known Seattle brand.

Jones got a big-time entrée into the East Coast market. And the Barclays Center got a company willing to help build its fledgling brand. Jones has already created a customized soda label with the Barclays Center logo.


The Soda Shoppe

As I reported in August, plans for the second level mezzanine of ADT Plaza, accessed by a grand stoop, sound like the Jones Soda Shoppe.

According to the web site, Jones Soda Stoop & Adjacent Terrace are expected to include:
# Open air structure at tip of the Plaza – the main access point to the Barclays Center – will serve as a year-round gathering point and meeting place for residents, visitors and tourists
# Prime location at the corner of Flatbush and Atlantic Avenues; the Jones Soda Stoop and Terrace will be visible to 60,000 vehicles that pass through the intersection daily
# WIFI capabilities

Jones Soda Shoppe expected to include:
# Jones Soda branded signs visible to Atlantic & Flatbush Avenues
# Open daily for residents, commuters, and event attendees
# WIFI capabilities
# Digital TV service displayed on plasma televisions
# Branded environment (e.g., cups, napkins, staff uniforms)


Maybe not any more.

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