18 May 2012 US: Soda makers scramble to fill void as sales drop
Cold, bubbly, sweet soda, long the American Champagne, is becoming product non grata in more places these days. Schools are removing sugary soft drinks from vending machines at a faster pace, and local governments from San Antonio to Boston are stepping up efforts to take them out of public facilities as the nation’s concerns about obesity and its costs grow.
Last year, the average American drank slightly under two sodas a day, a drop in per capita consumption of about 16 percent since the peak in 1998, according to Beverage Digest, a trade publication.
What began as a slow decline accelerated in the middle of the last decade and now threatens some of the best-known brands in the business. Coke and Pepsi are relying more than ever on the “flat” drinks and bottled waters in their portfolios and on increases in the price of sodas, forcing die-hard drinkers to pay more to feed their sugar habits.
“The question is, Are we seeing a modest, multiyear decline that will bottom out? Or are we seeing the beginning of a paradigm shift away from carbonated soft drinks?” said John Sicher, publisher of Beverage Digest and a longtime observer of the industry. “I don’t think anyone knows yet, but I think there are continuing headwinds against the category that aren’t abating.”
Health advocates are cautiously optimistic about the decline. “It is really important because sugary soft drinks are the No 1 source of calories in our diets,” said Margo Wootan, director of nutrition policy at the Center for Science in the Public Interest. “We get more calories from sodas and sugary drinks than any other individual food — cake, cookies, pizza, anything.”
But Wootan and others are worried about what may be taking the place of carbonated soft drinks in the American diet. They note the increasing appetite for energy drinks, loaded with sugar as well as caffeine, and noncarbonated sports drinks, which may have as much sugar as sodas.
“This is the next stage of where battle lines being drawn,” said Dr Harold Goldstein, executive director of the California Center for Public Health Advocacy, who often totes around a jar filled with two and a third cups of sugar, the amount consumed by drinking a soda every day for one week.
“Beverage companies are putting more and more emphasis on selling fortified beverages, as if fortified means healthier when in fact it often means more salt added to sugar.”
Not surprisingly, the country’s largest soda companies insist their carbonated soft drinks business will still grow, if not at as fast a clip as it has historically. “This is not a zero-sum game,” said Sandy Douglas, president of Coca-Cola North America.
But even they concede that unless the industry stumbles upon what it calls the holy grail, an all-natural sweetener with no calories, the future is going to be more firmly anchored in non-carbonated drinks.
“The health and wellness trend is huge, permanent and important,” Douglas said. “My crystal ball says that a smart beverage company will sell a variety of products, and some of them will have bubbles and some of them won’t.”
Coca-Cola and its competitors have spent the last two decades decreasing their reliance on carbonated soft drinks anyway.
For most of its history, for instance, PepsiCo sold Pepsi. It bought Mountain Dew in 1964 and 20 years later, introduced a soda called Slice. It starting bought the international rights to 7Up and added Mug Root Beer to its lineup in 1986.
It played around with those brands, adding diet and other versions. Then, in 1992, it signed a deal with Lipton to sell ready-to-drink teas that initiated a spate of joint ventures, acquisitions and new product introductions. It added brands like Aquafina, SoBe and Sierra Mist — many not carbonated.
“As a business, we first saw this coming several years ago, which led us to get ahead of it with things like Gatorade and Tropicana that have done very well for us,” said Simon Lowden, chief marketing officer for PepsiCo’s North American beverage arm.
The competition, Coca-Cola and Dr Pepper, pursued much the same strategy. All three companies amassed stables of brands that took them far beyond their foundations in carbonated soda, though it remained the cash cow.
At the time, Mr. Lowden said, they were driven by growing multiculturalism on the home front and their expanding global footprint, but their broad portfolios also have cushioned them from the impact of changing attitudes toward soda as the nation wages its war on obesity…..