For decades, soda has provided fans of this beloved beverage with a caffeine boost, but the struggling industry is now in urgent need of revitalization as consumers increasingly opt for healthier alternatives like water and tea. Beverage Digest reported a 1.2% decrease in total soda volume in 2015, with the average person consuming around 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, according to the latest available data. A growing number of consumers are turning away from soda as they seek to lower their sugar intake. In response to this trend, soda manufacturers have attempted to replicate the taste of sugar or high fructose corn syrup using sweeteners like stevia. Additionally, companies like PepsiCo and Coca-Cola have introduced smaller bottles and cans, which are appealing to consumers and enable these brands to charge more per ounce.
Local governments have also played a role in the decline of soda consumption by imposing taxes on sugary drinks. In Philadelphia, for instance, a tax of 1.5 cents per ounce on sugary beverages has led to sales plummeting by as much as 50% in some local grocery stores, prompting soda manufacturers to announce layoffs. “If you tune into any media outlet discussing soft drinks and beverage companies, you’ll hear claims linking obesity, diabetes, and other health issues directly to soda and other sugar-laden drinks,” said Chris Konyk, a business consultant and soft drink expert at Salient Management Company, in an interview with Food Dive. “Soft drink companies have become an easy target for criticism. Due to years of relentless scrutiny, consumers have begun to change their purchasing habits regarding soft drinks.”
Consumers who once felt at ease with a soda accompanying every meal or snack are now on the lookout for products they view as healthier. Bottled water surpassed carbonated soft drinks last year to become the largest beverage category by volume in the United States. Furthermore, the total U.S. wholesale value of the tea industry has skyrocketed—growing from $1.8 billion in 1990 to over $10.8 billion in 2016. As consumers seek healthier beverage options, the pressure mounts on the beverage industry to reformulate existing products, develop new ones, or enhance their portfolio through acquisitions. According to Nielsen’s recent 2016 Global Ingredients Study, 68% of North American consumers indicated they would pay more for products that are free from undesirable ingredients. Additionally, 61% believed that a shorter ingredient list equated to a healthier product.
“The beverage companies are repositioning themselves to lead the healthy beverage alternatives market,” Konyk noted. “If there are genuine or perceived health benefits, soft drink companies are considering incorporating such products into their offerings.” However, one challenge remains: the perception that drinks produced by soda companies are inherently unhealthy. Analysts predict that soda manufacturers will attempt to shift consumer beliefs through innovative advertising and marketing strategies. Coca-Cola, Dr Pepper Snapple, and PepsiCo have committed to reducing the calorie content from sugary drinks consumed by Americans by 20% before 2025. Coca-Cola boasts a variety of healthier options, including Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani, while Pepsi has bolstered its portfolio with Duke’s, Miranda, Naked Juices, and Aquafina.
“The soft drink companies are constantly researching the next trend and have aggressively acquired or partnered with health-conscious brands,” Konyk stated. “I don’t foresee this surge in healthy alternatives coming to an end anytime soon.” PepsiCo has been reshaping its beverage portfolio for over 20 years. A company spokesperson informed Food Dive that low- and no-calorie drinks now account for nearly half of its sales volume, a significant increase from just 24% two decades ago. The spokesperson expressed optimism that by 2025, at least two-thirds of the company’s global beverage portfolio would consist of offerings containing 100 calories or fewer from added sugars per 12-ounce serving. “We’re responding to the evolving needs of consumers and society,” the spokesperson said.
The company recently launched IZZE Fusions and Lemon Lemon, modernized soft drinks featuring bubbles, unique flavors, and lower calorie content. IZZE Fusions come in orange, mango, and strawberry melon flavors, with 60 calories per 12-ounce can, and contain no artificial sweeteners or flavors, relying instead on a blend of cane sugar and stevia. Mountain Dew Kickstart is another innovative product from PepsiCo, generating estimated annual retail sales of over $400 million in the past decade. This energy drink, aimed at millennials, is available in 12 flavors and contains 60-80 calories per 16-ounce can. PepsiCo also offers Stubborn Soda, which is made without high fructose corn syrup, artificial sweeteners, or azo dyes and features natural flavors.
James Quincey, the incoming CEO of Coca-Cola, informed analysts in February that “the company has outgrown Coke.” He emphasized the need for the company to reduce its sugar footprint by expanding its presence in the overall beverage market. “The company needs to be bigger than its core brand,” he said. One soda company, Dr Pepper Snapple, has shown resilience against declining sales, reporting a 2% increase in carbonated soft drink sales in the fourth quarter of 2016 compared to the previous year, driven by its citrus soda brand, Squirt. Last November, the company acquired Bai Brands, a manufacturer of enhanced water, for $1.7 billion, hoping it will 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 across our priority brands to meet changing consumer needs.” While health trends are on the rise, carbonated and sparkling soft drinks remain crucial to beverage companies as they generate the majority of profits. New marketing campaigns targeting millennials, such as Coca-Cola’s personalized cans and Pepsi promoting its sustainability efforts, are some of the tactics being employed to attract consumers. “Many companies are betting on the idea of moderation, getting creative with their packaging,” Konyk remarked. “I believe marketing strategies will support this approach and will focus on themes of reward or indulgence.”
David Portalatin, a food and beverage analyst with the NPD Group, cautioned that despite the decline in carbonated soft drink consumption, soda is unlikely to disappear anytime soon. He noted that when consumers purchase beverages away from home, soda is often their drink of choice. “While health concerns are widely discussed, the trend is more pronounced away from home, suggesting that consumers are also mindful of cost,” he observed.
In this evolving landscape, the beverage industry continues to adapt and innovate. As new products emerge, such as those under the Citracal Petites label, which focus on health and wellness, consumers will have even more choices that align with their values and preferences.