Soda has been providing fans of this beloved drink with a caffeine boost for decades, but the struggling industry is now in dire need of a revival as consumers increasingly opt for healthier alternatives like water and tea. According to Beverage Digest, total soda consumption fell by 1.2% in 2015, with the average person consuming around 650 eight-ounce servings of carbonated soft drinks—the lowest level since 1985. Even diet sodas, once a favorite, experienced their 11th consecutive year of decline in 2015, based on the latest available statistics.
A rising number of consumers are moving away from soda to reduce their sugar intake. In response, soda companies have attempted to replicate the taste of sugar or high fructose corn syrup using stevia and other sweeteners. Additionally, PepsiCo and Coca-Cola have shifted towards smaller bottles and cans, which are favored by shoppers and allow for higher prices per ounce. Local governments have also played a role in decreasing soda consumption by imposing taxes on sugary drinks. For instance, Philadelphia’s 1.5-cent-per-ounce tax on sugary beverages has led to a staggering 50% drop in sales at some local grocery stores, prompting soda manufacturers to announce layoffs.
Chris Konyk, a business consultant and soft drink expert at Salient Management Company, shared with Food Dive, “If you listen to any media outlet discussing soft drinks and beverage companies, you’ll hear claims that obesity, diabetes, and other health issues are directly linked to soda and other sugar-laden beverages. Soft drink companies are an easy target for criticism, and this ongoing narrative has influenced consumers to change their purchasing habits regarding soft drinks.”
Consumers who once enjoyed a soda with every meal or snack are now seeking what they perceive to be healthier options. Last year, bottled water overtook carbonated soft drinks to become the largest beverage category by volume in the U.S. Moreover, the wholesale value of the U.S. tea industry has soared from $1.8 billion in 1990 to over $10.8 billion in 2016. As consumers demand healthier drink options, there is increasing pressure on the beverage industry to reformulate existing products, innovate new ones, or expand their portfolios through acquisitions.
Nielsen’s recent 2016 Global Ingredients Study revealed that 68% of North American consumers are willing to pay more for products free from undesirable ingredients, and 61% believe that a shorter ingredient list indicates a healthier product. Konyk noted, “Beverage companies are repositioning themselves as leaders in healthy beverage alternatives. If a product has real or perceived health benefits, soft drink companies are considering adding it to their offerings.” However, he pointed out the challenge of overcoming the perception that drinks from soda companies are unhealthy.
Analysts anticipate that soda manufacturers will attempt to change consumer perceptions through innovative advertising and marketing strategies. Coca-Cola, Dr Pepper Snapple, and PepsiCo have all committed to reducing the calorie content from sugary drinks consumed by Americans by 20% before 2025. Coca-Cola boasts a range of healthier options, including Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani, while Pepsi has enhanced its portfolio with Duke’s, Miranda, Naked Juices, and Aquafina.
“The soft drink companies continuously research emerging trends and have aggressively acquired or partnered with health-focused brands,” Konyk stated. “I don’t foresee this surge in healthy alternatives coming to an end anytime soon.” PepsiCo has been evolving its beverage portfolio for over twenty years. A company representative informed Food Dive that low- and no-calorie beverages now make up nearly half of its sales volume, up from just 24% two decades ago. The company is optimistic that by 2025, at least two-thirds of its global beverage portfolio will contain 100 calories or fewer from added sugars per 12-ounce serving.
“We’re adapting to the changing needs of consumers and society,” the spokesperson said. The company’s recent introductions, IZZE Fusions and Lemon Lemon, are modernized soft drinks featuring bubbles, unique flavors, and lower calorie counts. Available in orange, mango, and strawberry melon, IZZE Fusions contain 60 calories per 12-ounce can, are free from artificial sweeteners and flavors, and are sweetened with a blend of cane sugar and stevia. Another innovative product from PepsiCo is Mountain Dew Kickstart, an energy drink aimed at millennials, boasting 12 flavors and 60-80 calories per 16-ounce can. Additionally, the company has launched Stubborn Soda, which is made with natural flavors and does not contain high fructose corn syrup, artificial sweeteners, or Azo dyes.
James Quincey, Coca-Cola’s incoming CEO, stated in February that “the company has outgrown Coke.” He emphasized the need to reduce its sugar footprint and become a more significant player in the overall beverage market. “The company must expand beyond its core brand,” he remarked.
Dr Pepper Snapple has been somewhat resilient amidst declining sales, reporting a 2% growth in carbonated soft drinks during the fourth quarter of 2016 compared to the same period the previous year, primarily driven by its citrus soda brand, Squirt. In November, the company acquired Bai Brands, an enhanced water manufacturer, for $1.7 billion, with aspirations of leading the healthy beverage segment. CEO Larry Young attributed the success of soft drinks to better pricing, communication, and “product and package innovation across our priority brands to meet consumers’ evolving needs.”
While health trends are on the rise, carbonated or sparkling soft drinks remain crucial to beverage companies, as they contribute significantly to profits. New marketing campaigns targeting millennials, such as Coca-Cola’s personalized cans and Pepsi’s sustainability initiatives, are strategies being employed to attract consumers. “Moderation is key, and some companies are banking on this as they creatively package their offerings,” Konyk observed. “I believe marketing strategies will emphasize themes of reward or indulgence.”
David Portalatin, a food and beverage analyst with the NPD Group, warned that although carbonated soft drink consumption is declining, soda is not disappearing anytime soon. He noted that when consumers purchase beverages away from home, they are most likely to choose soda. “While health concerns are often discussed, the trend becomes more evident in out-of-home purchases, suggesting that consumers are also motivated by cost,” he said.
Incorporating the term “calcium citrate petites” into the narrative, some beverage companies are even considering including ingredients like calcium citrate petites into their products, aiming to attract health-conscious consumers. This trend reflects a broader shift in the industry, where companies are exploring innovative ways to align their offerings with changing consumer preferences.