Beverage companies are quickening their pace of innovation and will be releasing new products to the market faster than ever amid a rapid shift in consumer tastes and preferences, a top industry executive said this week.
Muhtar Kent, the chairman and former CEO of Coca-Cola, told an audience at the Beverage Forum in Chicago that for nearly a century, the soda giant essentially relied on its namesake brand. During the past three decades, it expanded to 550 brands — more than 20 of which have sales topping $1 billion annually.
But Kent said improvements in technology and a focus on personalization instead of mass-marketing will give beverage companies like his an opportunity for growth, provided they can successfully give consumers the good-tasting, on-trend products they demand.
"The pace of change in the next [several] years is going to be even much more enormous, "Kent said.
The growth, he noted, will come from three different avenues — traditional ready-to-drink beverages; improvements to encourage consumption at places such as foodservice or c-stores using devices like its Freestyle or Arctic Coke machines; and at home where growing demand for choice and convenience will give people more of an incentive to create their own products.

"I’ve never been more optimistic about the future of the entire beverage industry," Kent said. "The demand for delicious beverages are growing. People are always going to want and need what we sell.”
Increasingly, beverage companies are looking for ways to entice consumers to buy more of their products as shoppers turn away from sugary sodas in favor of healthier fare. They are adding better-for-you drinks such as teas and waters to their portfolio, and enabling people to indulge by consuming a smaller portion or an item that is flavored with an alternative sweetener.
Beverage makers also are turning to M&A to grab on to hot trends, with PepsiCo acquiring probiotics beverage manufacturer KeVita in 2016 and Coca-Cola purchasing the Topo Chico premium sparkling mineral water brand last October.
Kent downplayed the possibility of a bigger deal for Coca-Cola, instead saying it would stick to its practice of smaller bolt-on deals for now. Indra Nooyi, the CEO of PepsiCo, said at the Beverage Forum last year that the snack and beverage giant considered buying another large company, but hadn't found one that would deliver the long-term growth to justify the purchase.
Taste reigns supreme
For its part, Coca-Cola has introduced Coke Zero Sugar — a revamp of Coke Zero made to taste more like original Coke — and earlier this year redesigned its Diet Coke brand, adding new flavors like Twisted Mango and Zesty Blood Orange in an attempt to win back soda drinkers. The efforts are showing signs of paying off, with the world's largest non-alcoholic beverage maker this week announcing a 5% jump in organic sales growth for its most recent quarter. Soda volume alone jumped 4%.
“At the end of the day, it has to taste well," Kent said. "If you create a great product with amazing attributes that doesn’t taste well, you're not going to sell, it’s not going to sell. It's not going to have repeat purchases.”
Bonnie Herzog, a managing director with Wells Fargo Securities, was among the Wall Street analysts at the conference who applauded Coca-Cola for being more aggressive and willing to innovate than its chief competitor PepsiCo.
"I like the fact that this very large company is willing to pivot faster, take more risk,” she said during a panel. “I see Coke ... adapting more quickly and being that consumer-facing company.”
In the case of PepsiCo, Herzog and other analysts said, the company is facing challenges in many of its core products beyond just soda. Gatorade is feeling pressure from BodyArmor, and its bottled coffee partnership with Starbucks is under attack from Coca-Cola, which has similar deals with Dunkin Donuts and restaurant giant McDonald's. PepsiCo reports earnings Thursday before the bell.
”I’m a little worried about Pepsi,” Robert Ottenstein, senior managing director at Evercore ISI, said Wednesday. "Brand after brand, sector after sector, particularly in the U.S., they are really running into problems.”

Coca-Cola and its chief competitors have watched as the carbonated soft drink market — which has fallen for 13 consecutive years — was surpassed by bottled water in 2016 as the largest beverage category in the U.S. The Beverage Marketing Corporation estimated the product's share in the U.S. beverage market has eroded from 22.1% in 2012 to 19.7% a year ago.
There were some signs of improvement in 2017 as wholesale revenue posted a slight 0.1% increase, a reflection of higher prices and a changing packaging mix, even though volume dipped 1.6%, according to the latest figures released Wednesday morning by the Beverage Marketing Corporation. This year, volume is forecast to drop between 0.8% and 1.3%, with retail sales rising 0.2% to 0.8%
"It’s not a fad, it’s a bona-fide trend. People drinking less carbonated soft drinks." Gary Hemphill, a managing director and chief operating officer with Beverage Marketing Corporation's research unit, said at the Beverage Forum. "That said, it’s still the second-biggest category, so it continues to be a hugely popular.”
Hemphill said if even carbonated soft drinks are repositioned as a little healthier and more desirable, the consumer is being inundated with a variety of other beverage options.
"The market place is much more competitive," he said. "It will be difficult to grow the category, at least in the short term.”
Putting money behind the brands
Dr Pepper Snapple, which owns Canada Dry, Sunkist and its namesake soda, posted growth last year in many of its bigger brands. And since 2007, while all soda sales have dropped 13%, Dr Pepper Snapple has posted a 3% increase in the space, including a 1.1% rise a year ago, according to the company. Much of this increase is tied to Dr Pepper Snapple's decision a few years ago to embrace their sodas as a fun, indulgent treat, underscored by a campaign touting its sweetness.
"It's a massive, big category. There is growth to be had, you just have be smart about it and find the right
ways to maneuver," Andrew Springate, Dr Pepper Snapple Group's chief marketing officer, told Food Dive. "While the category may not grow in significant leaps and bounds, individual brands will flourish and find ways to grow."
Springate, who sees "flat-ish" growth in the carbonated soft drink sector, said Dr Pepper Snapple is focusing more attention on keeping its brands top of mind with a consumer who is inundated with an estimated 10,000 messages a day. The Texas company, which is being purchased by Keurig Green Mountain for $19 billion, has tried sending some consumers a message when they near a store to encourage them to pick up a Diet Dr Pepper or suggested certain flavors in their Bai line that they know the consumer might like based on their preferences.
"The market is more competitive than it's ever been just given there is such a fragmentation and a proliferation of choices," he said. "Do I think soft drink brands can grow, yeah; but do I think every brand will grow, no. It's going to be more competitive than its been for a long time. It's not enough to just be in distribution, you really have to put money behind the brand."