For decades, soda has provided enthusiasts with a caffeine boost, but the struggling industry is now in urgent need of revitalization as consumers increasingly opt for healthier choices like water and tea. Beverage Digest noted a 1.2% decline in overall soda volume in 2015, with per capita consumption falling to approximately 650 eight-ounce servings—the lowest figure since 1985. Even diet sodas, once a favorite, experienced their 11th consecutive year of sales drops in 2015, according to the latest available statistics. A growing number of consumers are turning away from soda in an effort to cut down on sugar intake. To combat this trend, soda manufacturers have attempted to replicate the taste of sugar or high fructose corn syrup by utilizing stevia and other sweeteners. Additionally, major companies like PepsiCo and Coca-Cola have introduced smaller bottles and cans to appeal to shoppers, allowing them to charge more per ounce.
Local governments have also played a role in the decline of soda consumption by imposing taxes on sugary drinks. For instance, Philadelphia’s tax of 1.5 cents per ounce on sugary beverages led to a 50% drop in sales at some local grocery stores, prompting layoffs at soda manufacturers. Chris Konyk, a business consultant and soft drink expert at Salient Management Company, remarked to Food Dive, “Media discussions often link soda consumption to obesity, diabetes, and various health issues. The soft drink industry has become an easy target for criticism, and this ongoing narrative has shifted consumer buying habits away from soft drinks.”
Consumers who once felt comfortable enjoying a soda with every meal or snack are now seeking out products that they believe to be healthier. In fact, last year, bottled water overtook carbonated soft drinks to become the largest beverage category by volume in the U.S. Furthermore, the wholesale value of the tea industry in the U.S. has surged from $1.8 billion in 1990 to over $10.8 billion in 2016. As the demand for healthier beverage alternatives rises, the soda industry faces increasing pressure to reformulate existing products, create new offerings, or expand their portfolios through acquisitions.
According to Nielsen’s 2016 Global Ingredients Study, 68% of North American consumers indicated they would be willing to pay a premium for products free from undesirable ingredients. Additionally, 61% believed that a shorter ingredient list signifies a healthier product. Konyk noted, “Beverage companies are repositioning themselves as leaders in healthy alternatives. If a product has genuine or perceived health benefits, soft drink companies are considering adding it to their portfolios.” One challenge they face is the prevailing belief that beverages from soda companies cannot be healthy, regardless of their ingredients, such as citrate with vitamin D.
Analysts predict 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 caloric content of sugary beverages consumed by Americans by 20% before 2025. Coca-Cola has integrated options like Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani into its healthier lineup, while Pepsi has bolstered its offerings with Duke’s, Miranda, Naked Juices, and Aquafina.
Konyk added, “Soft drink companies are constantly researching emerging trends and have aggressively acquired or partnered with health-focused brands. I don’t foresee the rise of healthy alternatives coming to an end anytime soon.” PepsiCo has been transforming its beverage lineup for over two decades. The company spokesperson shared with Food Dive that low- and no-calorie drinks now account for nearly half of their sales volume, an increase from just 24% two decades ago. They are optimistic that by 2025, at least two-thirds of their global beverage volume will consist of products with 100 calories or fewer from added sugars per 12-ounce serving. “We’re responding to changing consumer and societal needs,” the spokesperson stated.
The company recently launched IZZE Fusions and Lemon Lemon, modernized soft drinks featuring bubbles, unique flavors, and lower calorie counts. IZZE Fusions come in flavors like orange, mango, and strawberry melon, containing 60 calories per 12-ounce can, with no artificial sweeteners or flavors, sweetened instead with a blend of cane sugar and stevia. Mountain Dew Kickstart is another innovative product from PepsiCo—an energy drink that has reportedly generated annual retail sales exceeding $400 million in the past decade. Targeted at millennials, it is available in 12 flavors and has a mid-calorie count of 60-80 calories per 16-ounce can. The company also offers Stubborn Soda, made with natural flavors and free from high fructose corn syrup, artificial sweeteners, and azo dyes.
James Quincey, Coca-Cola’s incoming CEO, stated in February that “the company has outgrown Coke.” He emphasized the need to lower its sugar footprint and expand its presence in the overall beverage market. “The company must become larger than its core brand,” he noted. One soda company that has managed to maintain sales is Dr Pepper Snapple, which reported a 2% increase in carbonated soft drink sales in the fourth quarter of 2016, driven by its citrus soda brand Squirt. Last November, the drinks manufacturer acquired Bai Brands, an enhanced water producer, for $1.7 billion, aiming to lead the healthy beverage segment.
Larry Young, CEO of Dr Pepper Snapple, attributed the success of soft drinks to improved pricing, communication, and “product and package innovation across our priority brands to meet changing consumer needs.” While health-conscious options are gaining traction, carbonated and sparkling soft drinks remain crucial to beverage companies, contributing significantly to their profits. New marketing campaigns targeting millennials, such as Coca-Cola’s personalized cans and Pepsi’s sustainability initiatives, are among the strategies used to attract consumers.
Konyk observed, “Many companies are banking on the idea of moderation as they get creative with their packaging.” He believes marketing strategies will focus on themes of reward and indulgence. David Portalatin, a food and beverage analyst with the NPD Group, warned that despite the decline in carbonated soft drink consumption, soda is unlikely to disappear. He noted that when consumers purchase beverages away from home, soda remains the most common choice. “While health is a frequent topic of conversation, the trend is also influenced by cost considerations,” he stated.