Thirst for nonalcoholic option creates Dry Soda

After having four children, Sharelle Klaus had spent too many months of her life without wine.

She wasn't happy with the nonalcoholic alternatives during her pregnancies — Coke, water, iced tea — so after her youngest child turned 1, she set out to create a better drink: Dry Soda.

Klaus spent much of 2005 mixing thousands of samples in her Tacoma kitchen before settling on four lightly sweetened flavors — lavender, lemongrass, rhubarb and kumquat — that are now sold in 12-ounce bottles at some of the swankiest restaurants in Seattle and California.

Dry Soda is sweeter than a seltzer but more subtle than a sparkling juice like Izze. Klaus sees Dry Soda as a wine substitute that complements certain foods. She recommends restaurants charge $5 to $7 a bottle and serve it in champagne flutes.

"I wanted people who weren't drinking to feel special and important, too," Klaus said. "When someone opens you a Coke, it's not that special."

Dry Soda is bottled in Los Angeles, where restaurants like Il Grano sometimes include it in wine tastings or use it as an aperitif.

"It's fun," said Mario Marino, manager of Il Grano. "People love it."

Dry Soda has taken a while to catch on at Dahlia Lounge in Seattle, which sells about 48 bottles a month.

"It's kind of an acquired taste," said R.E. Mason, a manager there. He's seen customers send it back because they were expecting more flavor.

Seattle chefs seem to have acquired a taste for it. One recently floated a cucumber sorbet in the lemongrass flavor, while another marinated duck in the kumquat soda.

Whole Foods now stocks it in 28 stores in the West, including Seattle. Dry Soda also sells the bottles at other grocery stores and wine shops, and from its new headquarters near Pioneer Square.

Suggested retail price is $1.99 for a bottle, $6.99 for a four-pack and $20 for a 12-pack.

With just 11 employees, the company until last fall was based in Klaus' home, which some employees dubbed "Dry Towers." Now she and her family have a new home in Madrona, a short commute from Dry Soda's new 2,800-square foot headquarters at the corner of First Avenue South and South Jackson Street.

Klaus, 37, has worked as an airport consultant, the founder of a now-defunct online community for children called PlanetSquid, and president of the Forum for Women Entrepreneurs.

She chose the name "Dry Soda," because in wine parlance "dry" means "less sweet."

"That's the most significant attribute," Klaus said. "I wanted people to know it was going to be much less sweet than other sodas."

Klaus launched Dry Soda in 2005 with a home-equity loan and a U.S. Small Business Administration loan.

Last May, she raised $1.5 million from 26 investors in New York, California and the Seattle area.

Competition is heavy in the beverage market. Whole Foods recently began carrying Pepsi's new high-energy protein drink line called Fuelosophy, and Kellogg's is pushing its new Special K20 Protein Water.

A couple miles north of Dry Soda is the headquarters of Jones Soda, which has become a national phenomenon with its hip bottle labels and unusual flavors. That company continues to innovate as well, branching into energy drinks and organic teas.

In the midst of all that competition, carbonated soft-drink volumes are falling while products such as bottled water gain, according to industry consultants Beverage Marketing Corp.

Given the heated market, Klaus does not plan to sit still.

Next month, she will approach investors for $2 million more "to get us through the rest of our western U.S. expansion and into some strong national chains."

And Klaus is thinking about future flavors, possibly basil or juniper berry.

"I didn't think the world was ready for basil soda when I first started," she said.

"But now that we've introduced them to the concept of culinary sodas, now they are."

— Melissa Allison

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Retail Report appears Fridays. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com. Monica Soto Ouchi covers goods, services and online retail. She can be reached at 206-515-5632 or msoto@seattletimes.com.