Soda has provided fans of this popular drink with a caffeine boost for decades, but the struggling industry is now in dire need of its own revival as consumers increasingly opt for healthier choices such as water and tea. According to Beverage Digest, total soda volume saw a decline of 1.2% in 2015, with each individual consuming approximately 650 eight-ounce servings of carbonated soft drinks—the lowest figure since 1985. Even diet soda, once a favorite, experienced its 11th consecutive year of decline in 2015, based on the latest available data.
An increasing number of consumers are moving away from soda in an effort to reduce their sugar intake. To combat this trend, soda companies have sought to replicate the taste of sugar or high fructose corn syrup using sweeteners such as stevia. Additionally, PepsiCo and Coca-Cola have shifted to smaller bottle and can sizes, which appeal to shoppers and enable the companies to charge more per ounce. Local governments have also played a role in the drop in soda consumption by imposing taxes on sugary beverages. For instance, a 1.5-cent-per-ounce tax in Philadelphia has led to a significant 50% reduction in sales at some local grocery stores, prompting layoffs among soda manufacturers.
Chris Konyk, a business consultant and soft drink expert at Salient Management Company, stated, “Media discussions surrounding soft drinks often link obesity, diabetes, and other health concerns directly to soda and sugary beverages.” He noted that soft drink companies have become easy targets for criticism, and as this narrative has persisted, consumers have begun to change their purchasing habits regarding soft drinks.
Consumers who once enjoyed a soda with every meal or snack are now seeking alternatives they perceive as healthier. In fact, last year, bottled water surpassed carbonated soft drinks to become the largest beverage category by volume in the U.S. Additionally, the total wholesale value of the tea industry in the U.S. has skyrocketed from $1.8 billion in 1990 to over $10.8 billion in 2016.
With consumers prioritizing healthier drink options, the beverage industry faces mounting pressure to reformulate existing products, create new ones, or expand their portfolios by acquiring other brands. A recent Nielsen 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 signifies a healthier product.
“The beverage companies are reshaping their identities to lead in healthy beverage alternatives,” Konyk explained. “If a product has real or perceived health benefits, soft drink companies are considering adding it to their portfolios.” One of the challenges they face is the prevailing perception that beverages from soda companies are inherently unhealthy. Analysts predict that soda manufacturers will attempt to alter consumer perceptions through innovative advertising and marketing strategies. Coca-Cola, Dr Pepper Snapple, and PepsiCo have all pledged to reduce the caloric intake from sugary drinks consumed by Americans by 20% before 2025. Coke has incorporated brands like Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani into its healthy options, while Pepsi has bolstered its offerings with Duke’s, Miranda, Naked Juices, and Aquafina.
Konyk remarked, “Soft drink companies continuously research emerging trends and have aggressively acquired or partnered with healthy brands. I don’t expect this surge of healthy alternatives to wane anytime soon.” PepsiCo has been evolving its beverage lineup for over twenty years, with a company representative indicating that low- and no-calorie drinks now account for nearly half of its sales volume, up from just 24% two decades ago. They aim for at least two-thirds of their global beverage portfolio to contain 100 calories or fewer from added sugars per 12-ounce serving by 2025.
“We’re responding to changing consumer and societal needs,” the spokeswoman asserted. Recently launched products like IZZE Fusions and Lemon Lemon are modernized soft drinks featuring bubbles, unique flavors, and lower calorie counts. IZZE Fusions come in orange, mango, and strawberry melon flavors and contain 60 calories per 12-ounce can, with no artificial sweeteners or flavors, using a blend of cane sugar and stevia for sweetness. Another innovative offering is Mountain Dew Kickstart, an energy drink aimed at millennials, which boasts an estimated annual retail sales of over $400 million. Available in 12 flavors, it has a mid-calorie count of 60-80 calories per 16-ounce can. The company also markets Stubborn Soda, a beverage made with natural flavors and free from high fructose corn syrup, artificial sweeteners, or Azo dyes.
James Quincey, Coca-Cola’s incoming CEO, informed analysts in February that “the company has outgrown Coke.” He emphasized the need for the company to broaden its market presence beyond its core brand. Interestingly, Dr Pepper Snapple has managed to remain somewhat insulated from declining sales, reporting a 2% growth in carbonated soft drinks during the fourth quarter of 2016 compared to the previous year, driven largely by its citrus soda brand, Squirt. Last November, the company acquired Bai Brands, an enhanced water manufacturer, for $1.7 billion, with aspirations of leading the healthy beverage segment.
Larry Young, CEO of Dr Pepper Snapple, noted that the success of soft drinks can be attributed to improved pricing, communication, and “product and package innovation across our priority brands to meet consumers’ changing needs.” While healthy options are on the rise, carbonated soft drinks remain crucial for beverage companies, as they contribute significantly to overall profits. New marketing campaigns targeting millennials, like Coke’s personalized cans and Pepsi’s sustainability initiatives, are strategies being employed to attract consumers.
“Moderation is what some companies are banking on as they creatively package their offerings,” Konyk observed. “I believe marketing strategies will emphasize rewards or indulgence themes.” David Portalatin, a food and beverage analyst with NPD Group, cautioned that despite the downward trend in carbonated soft drink consumption, soda is unlikely to vanish entirely. He pointed out that when consumers purchase beverages outside the home, soda remains the most likely choice. “While health concerns are prevalent, the trend appears even more pronounced when away from home, suggesting that cost also weighs heavily on consumer decisions,” he concluded.
As consumers seek healthier options, they may wonder about the nutritional content of these drinks, including how many mg of calcium citrate per day is advisable for optimal health.