Soda has provided fans of this beloved drink with a caffeine boost for many years. However, the struggling soda industry now seeks a revival as more consumers gravitate towards healthier choices like water and tea. According to Beverage Digest, total soda consumption fell by 1.2% in 2015, with individuals consuming approximately 650 eight-ounce servings of carbonated soft drinks—the lowest level since 1985. Even diet soda, once a favorite, experienced its 11th consecutive year of decline in 2015, based on the most recent data available.
An increasing number of consumers are abandoning soda in their efforts to cut down on sugar intake. To counter this trend, soda companies have attempted to replicate the taste of sugar or high fructose corn syrup using alternatives like stevia and other sweeteners. Additionally, major players such as PepsiCo and Coca-Cola have introduced smaller bottles and cans, which have gained popularity among shoppers and enabled them to charge more per ounce.
Local governments have also played a role in decreasing soda consumption by imposing taxes on sugary beverages. In Philadelphia, a tax of 1.5 cents per ounce on sugary drinks has led to sales declines of up to 50% in some local grocery stores, prompting soda manufacturers to announce layoffs. Chris Konyk, a business consultant and soft drink expert at Salient Management Company, remarked to Food Dive, “Media coverage often links obesity, diabetes, and other health issues directly to soda and sugar-laden beverages. Soft drink companies are easy targets for criticism, and this ongoing narrative has led consumers to alter their purchasing habits regarding soft drinks.”
Consumers who once enjoyed soda with every meal or snack are now seeking healthier options. Last year, bottled water overtook carbonated soft drinks, becoming the largest beverage category by volume in the U.S. The wholesale value of the tea industry in the U.S. has also surged, increasing from $1.8 billion in 1990 to over $10.8 billion in 2016. With the demand for healthier drink alternatives rising, the beverage industry faces pressure to reformulate existing products, create new ones, or expand their portfolios through acquisitions.
Nielsen’s 2016 Global Ingredients Study revealed that 68% of North American consumers are willing to pay more for products free of undesirable ingredients. Additionally, 61% believe that a shorter ingredient list signifies a healthier product. Konyk stated, “Beverage companies are shifting their focus to become leaders in healthy alternatives. If a product has genuine or perceived health benefits, soft drink companies are considering it for their portfolio.” However, a significant challenge remains: the perception that drinks from soda companies are inherently unhealthy. Analysts predict that soda manufacturers will strive to change this mindset through innovative advertising and marketing strategies.
Coca-Cola, Dr Pepper Snapple, and PepsiCo have all pledged to reduce sugary drink calories consumed by Americans by 20% before 2025. Coca-Cola offers a range of healthier options, including Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani, while Pepsi has bolstered its selection with brands like Duke’s, Miranda, Naked Juices, and Aquafina. Konyk remarked, “Soft drink companies constantly research emerging trends and actively acquire or partner with healthier brands. I don’t anticipate this surge of healthy alternatives coming to an end anytime soon.”
For over two decades, PepsiCo has been transforming its beverage lineup. A spokesperson informed Food Dive that low- and no-calorie drinks now account for nearly half of its sales volume, up from just 24% two decades ago. The company aims for at least two-thirds of its global beverage portfolio to contain 100 calories or fewer from added sugars per 12-ounce serving by 2025. “We are responding to changing consumer and societal needs,” the spokesperson added.
Recently launched products like IZZE Fusions and Lemon Lemon represent a new generation of soft drinks featuring bubbles, unique flavors, and lower calorie counts. IZZE Fusions come in flavors such as orange, mango, and strawberry melon, each containing 60 calories per 12-ounce can and sweetened with a blend of cane sugar and stevia, without artificial sweeteners or flavors. Another innovation, Mountain Dew Kickstart, has generated estimated annual retail sales exceeding $400 million in the past decade. Targeted at millennials, this mid-calorie cola contains 60-80 calories per 16-ounce can and is available in 12 flavors. The company also offers Stubborn Soda, which is made with natural flavors and contains no high fructose corn syrup, artificial sweeteners, or azo dyes.
James Quincey, Coca-Cola’s incoming CEO, indicated in February that “the company has outgrown Coke.” He emphasized the need to reduce the company’s sugar footprint and expand its presence in the broader beverage market. “The company must become bigger than its core brand,” he stated.
Dr Pepper Snapple has been somewhat insulated from declining sales, reporting a 2% growth in carbonated soft drinks in the fourth quarter of 2016 compared to the same period the previous year, driven by its citrus soda brand, Squirt. In November, the company acquired Bai Brands, an enhanced water manufacturer, for $1.7 billion, hoping to lead the healthy beverage segment in the future. Larry Young, CEO of Dr Pepper Snapple, attributed the success of soft drinks to improved pricing, communication, and product and package innovation that addresses evolving consumer needs.
Despite the growing trend toward health-conscious options, carbonated and sparkling soft drinks remain crucial to beverage companies as they generate the majority of their profits. New marketing campaigns aimed at millennials, such as Coca-Cola’s personalized cans and Pepsi’s sustainability efforts, are strategies being employed to attract consumers. Konyk noted, “Moderation is what some companies are banking on as they innovate their packaging. I believe marketing strategies will emphasize indulgence and rewards.”
David Portalatin, a food and beverage analyst at the NPD Group, cautioned that while carbonated soft drink consumption is declining, soda is unlikely to disappear entirely. He observed that when consumers buy beverages away from home, they tend to choose soda. “While health concerns are frequently cited, the more pronounced trend in out-of-home purchases suggests that cost is also a significant factor for consumers,” he said.
In this evolving landscape, the beverage industry must adapt, incorporating elements like calcium carbonate and calcium citrate into their formulations to meet changing consumer preferences while striving to maintain their traditional soda offerings.