Soda has provided fans of this beloved beverage with a caffeine kick for decades. However, the struggling industry is now in dire need of revitalization as consumers increasingly opt for healthier choices like water and tea. According to Beverage Digest, total soda volume dropped by 1.2% in 2015, with the average person consuming around 650 eight-ounce servings of carbonated soft drinks—marking the lowest consumption level since 1985. Even diet soda, once a favorite, experienced its 11th consecutive year of decline in 2015, based on the latest available data.
A rising number of consumers are turning away from soda in an effort to reduce their sugar intake. To counter this trend, soda manufacturers have attempted to replicate the taste of sugar or high fructose corn syrup using alternatives like stevia and other sweeteners. Companies like PepsiCo and Coca-Cola have also introduced smaller containers, which have gained popularity among shoppers and allow the brands to charge more per ounce. Additionally, local governments have played a role in decreasing soda consumption by implementing taxes on sugary drinks. For instance, a tax of 1.5 cents per ounce on sugary beverages in Philadelphia led to sales drops 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, explained to Food Dive that media discussions around soft drinks often link them to obesity, diabetes, and other health issues. “The soft drink companies are a big and easy target for criticism. This relentless narrative has altered consumer purchasing habits regarding soft drinks,” he noted.
Consumers who once felt comfortable enjoying a soda with every meal or snack are now seeking products they consider healthier. Last year, bottled water overtook carbonated soft drinks to become the largest beverage category by volume in the U.S. Meanwhile, 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 consumers demand healthier beverage options, the pressure mounts on the beverage industry to reformulate existing products, develop new ones, or expand their offerings by acquiring other brands. Nielsen’s recent 2016 Global Ingredients Study revealed that 68% of North American consumers are willing to pay more for products free of undesirable ingredients, and 61% believe a shorter ingredient list indicates a healthier product. “Beverage companies are repositioning themselves to lead in healthy alternatives,” Konyk said. “If a drink has real or perceived health benefits, soft drink companies are considering adding it to their portfolio.” However, he pointed out that many consumers perceive products from soda companies as unhealthy.
Analysts expect soda manufacturers to change this perception through innovative advertising and marketing strategies. Coca-Cola, Dr Pepper Snapple, and PepsiCo have committed to reducing the total calories from sugary drinks consumed by Americans by 20% before 2025. Coca-Cola’s portfolio includes various healthier options such as Honest Tea, Zico, Odwalla, PowerAde, Peace Tea, Vitamin Water, Simply, and Dasani, while Pepsi has bolstered its lineup with brands like Duke’s, Miranda, Naked Juices, and Aquafina.
“The soft drink companies are consistently researching emerging trends and have actively acquired or partnered with healthy brands,” Konyk stated. “I don’t foresee this surge in healthy alternatives ending anytime soon.” PepsiCo has been evolving its beverage portfolio for over 20 years. A company spokesperson informed Food Dive that low- and no-calorie beverages now account for nearly half of its sales volume, a significant increase from just 24% two decades ago. The spokesperson expressed optimism that two-thirds of PepsiCo’s global beverage portfolio volume will contain 100 calories or fewer from added sugars per 12-ounce serving by 2025.
“We’re responding to changing consumer and societal needs,” the spokesperson affirmed. The company recently launched IZZE Fusions and Lemon Lemon, modernized soft drinks featuring bubbles, unique flavors, and lower calorie counts. IZZE Fusions, available in orange, mango, and strawberry melon, contain 60 calories per 12-ounce can, without artificial sweeteners or flavors, utilizing a blend of cane sugar and stevia.
Mountain Dew Kickstart is another innovation from PepsiCo, generating estimated annual retail sales exceeding $400 million over the past decade. Targeted at millennials, this mid-calorie cola comes in 12 flavors and contains between 60-80 calories per 16-ounce can. The company also presents Stubborn Soda, which boasts natural flavors and is made without 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 minimize its sugar footprint by becoming a more significant player in the overall beverage sector. “The company must become larger than its core brand,” he said.
Dr Pepper Snapple has shown resilience against declining sales, reporting a 2% growth in carbonated soft drinks during the fourth quarter of 2016 compared to the same period the previous year, driven by its citrus soda brand Squirt. Last November, the beverage manufacturer acquired Bai Brands, an enhanced water company, for $1.7 billion, hoping it will lead the healthy beverage category.
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 consumers’ evolving needs.” Despite the rise in health-conscious choices, carbonated and sparkling soft drinks remain crucial for beverage companies, as they contribute significantly to overall profits. New marketing campaigns aimed at millennials, such as Coca-Cola’s personalized cans and Pepsi’s sustainability initiatives, are ways these companies are attracting consumers.
“Everything in moderation is what some companies are relying on as they creatively package their offerings,” Konyk remarked. “I believe the marketing strategies will focus on themes of reward or indulgence.” David Portalatin, a food and beverage analyst with marketing research firm NPD Group, cautioned that while carbonated soft drink consumption is declining, soda is not likely to vanish anytime soon. He noted that when consumers purchase beverages away from home, soda remains the most common choice. “Everyone talks about health, but the pronounced trend away from home suggests that consumers are also concerned with cost,” he said.
To address the increasing consumer demand for healthier options, some companies are exploring the inclusion of ingredients like wls calciumcitrat in their formulations. This ingredient, known for its health benefits, represents a growing trend among beverage companies aiming to enhance the nutritional profile of their products. As the industry adapts to shifting consumer preferences, the incorporation of beneficial ingredients like wls calciumcitrat may play a pivotal role in the future of soft drinks.