There's nothing wrong with the Crushed Melon flavor at Jones Soda (Nasdaq: JSDA). The real problem is crushed margins.

Shares of the edgy soft drink maker fell sharply Friday morning, on the heels of yet another disappointing report. Net revenue inched just 2% higher to $9.4 million. Last year, the company broke even; this year, it reported a $0.15-per-share loss. Wall Street was braced for the deficit, but it was only looking for a $0.04 per-share slip.

Gross margins tanked on the heels of discontinued inventory items. Gross revenue increased 12% as a result of the company's recent canned product push through National Beverage (Nasdaq: FIZZ), but that's clearly not going as well as it should have by now. 

"2008 will be a transitional year," the company's new CEO warns. That's the equivalent of a pro sports team looking forward to a season as a "rebuilding" year. Fans are welcome to stick around, but don't expect a lot of victories.

This marks the third consecutive money-losing quarter for the company. That stings hard because I recommended the shares to my fellow Rule Breakers newsletter subscribers last year at a much higher price point.

I never thought that Jones Soda would rival Coca-Cola (NYSE: KO) or PepsiCo (NYSE: PEP) for carbonated supremacy, but I have seen fast-growing players like Hansen Naturals (Nasdaq: HANS) hit it out with a single product.

A year ago, Jones Soda was riding high on brisk sales of its premium-priced bottled brews and striking attractive deals to get into places like Panera (Nasdaq: PNRA) and Seattle Seahawks home games. Now the stock is being dismissed as easily as running back Shaun Alexander was when the Seahawks showed him the door last month.

As long as the canned product isn't diluting the perceived brand allure of the creative bottled products -- and I don't think even Jones Soda knows if this is the case or not -- I still like Jones Soda's chances.

Turnarounds -- and transitions -- take time, and the company's new regime deserves at least a couple of quarters to prove its worth.

Other ways to keep up -- or down -- with the Joneses:

Jones Soda is a Rule Breakers newsletter stock pick. Coca-Cola is an Inside Value recommendation. For more market-beating stock ideas, take a free 30-day trial to any of our newsletters.  

Longtime Fool contributor Rick Munarriz actually enjoyed the Jones Soda candy corn, pumpkin, and caramel apple sodas that Target sold for Halloween two years ago. He also owns shares in Jones Soda. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.