Why one brand is dropping its prices while tariffs are pushing costs up across retail

Aerflo’s portable carbonation system consists of a bottle, a carbonation device and proprietary CO2 capsules that are returned, sanitized and refilled at the company’s automated facility in New Jersey. Each capsule can carbonate up to four bottles of sparkling water, and customers exchange empty capsules for full ones via a USPS-enabled mail-back program — no auto-delivery subscription needed. To build out the facility, Aerflo has raised $10 million in venture capital as of last year.

Aerflo says that each CO2 capsule can offset over 330 single-use cans, with each refill pack containing 12 capsules that cost $23.50. This shakes out to $.49 per sparkling water bottle, which the company claims can help save customers over 60% per sparkling water serving compared to store-bought brands like LaCroix and Topo Chico.

Aerflo co-founders John Thorp and Buzz Wiggins told Modern Retail the goal to slash the price was in the works before tariffs hit. Because the company owns its circular supply chain, it was able to reduce COGs and scale production over the past few months and pass on those savings to customers. For instance, Aerflo’s freight expenses are minimal compared to other brands since all manufacturing and fulfillment is done in the U.S. But the timing of the announcement helped the company stand out among a sea of brands increasing their prices.  

“It was really important to find a way to drive a lower cost of entry to Aerflo,” Thorp said. “It  means more people can switch over to this model, especially from single-use cans.”

The capsules, which have a five year lifespan, can be cleaned, inspected, and refilled to go into the next shipment. “That delivers over 50% savings to the end customer versus commercial brands of sparkling water,” Thorp said. 

It’s important to note that Aerflo is able to control its pricing due to its low reliance on overseas manufacturing. Although, Thorp noted, the company still has to import some raw material to make its products in the U.S.

Wiggins said that before launching last September, the company spent three-and-a-half years designing its capsule refill technology and USPS-approved mail-back refill program. The company collaborated with the postal service to be able to ship the capsules in both directions, Wiggins said. USPS does generally permit compressed CO2 to be shipped through its network. 

“It’s what led to building out our own facilities,” Thorp said. “We felt that this model would also be better because we can make it cheaper for the end customers.” 

With Aerflo in its first year operating as a direct-to-consumer brand, the price drop is a conscious decision to lower the system’s barrier of entry and bring in more customers. “It wasn’t necessarily a bet against China,” Thorp said. “We thought we may as well launch now, because we saw a lot of brand emails going out about prices going up.”

The refill program’s design came after early testing, when a number of users were hesitant to commit to a subscription before testing out the bottle system. “We saw fairly large break points in some testing we did around pricing,” Thorp said. 

After the initial starter kit, customers receive 12 capsules to use and send back when they’re ready for refills. “It then goes into your mailbox and once the label gets scanned, we trigger a new order for you,” Wiggins said. 

This is in contrast to the typical auto-shipment model that many DTC brands use. “It’s a little lumpier for the business in terms of how the revenue comes in, but it puts the power in the customer’s hands,” Thorp said. This also helped reduce the capsule pricing, he said, by allowing new customers to choose whether or not to receive a refill pack in the starter kit.

At this time, many brands are recalibrating their pricing strategy based on new tariffs. A number of companies, such as menswear brand Mack Weldon, are “locking in” prices on popular products to drive sales.

Some experts say it’s important to find ways to absorb or reduce those costs so as to not alienate already price-conscious shoppers with price hikes. Mehmet Altug is an associate professor of operations management at George Mason University’s Costello College of Business. Altug said that consumers’ perception of a product’s pricing is as important as ever. It’s not just because of tariffs — customers have already been inundated with price increases over the past few years due to sustained inflation. “Companies need to be very careful because customers have what we call a ‘reference price’ in their minds,” he said, which is what they reasonably deem to be a fair price for the product they’re eyeing.

For Aerflo, the company hopes the price reduction can lead to scaling as it grows its customer base and strikes retail deals, given that the brand is a startup competing in a space crowded by incumbents like Soda Stream. Currently, the Aerflo starter system is sold at third-party marketplaces like Goop, Food52 and Uncommon Goods. “We’re trying to be very strategic about how we can continue to reduce prices even further in the future,” Wiggins said.