Soda, bottled water dominate in quenching America's thirst
- Americans are drinking more bottled water, leading to $24.1 billion in sales in 2017, according to Beverage Digest data cited by Bloomberg. In addition, an increase in soda prices last year helped lift revenue in that category to $81.6 billion, or more than half of the $135.7 billion in total beverage sales by dollar amount, the report says.
- Overall, retail sales in the U.S. beverage market grew about 3% in 2017 and volume increased roughly 2%, Beverage Marketing Corporation said.
- Although soda sales remain a big part of the beverage industry’s 2017 revenue, the Beverage Digest noted consumers continue to cut back on carbonated soft drinks, with volumes dipping for 13 years in a row.
The Beverage Digest data shows what many in the industry recognize: today’s thirsty consumers are looking for healthy options, steadily turning away from sugary sodas and in favor of water, teas and other drinks. Sugar taxes implemented in some cities likely also have led to the decline of soda consumption.
The water trend has not only spurred more carbonated products, but lead to more boxed waters and even "raw" water where people pay as much as $37 for the unfiltered product. Soda makers 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.
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 from 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 in April. "That said, it’s still the second-biggest category, so it continues to be a hugely popular.”
Soda giants Coca-Cola and PepsiCo. have focused on boosting sales other than carbonated drinks to meet consumer demands, and there are signs that could be paying off. Pepsico has introduced bubbly and Coca-Cola purchased the Topo Chico premium sparkling mineral water brand last October — an acquisition and a brand launch that underscore the demand for bubbles in water without the sugar. Coca-Cola also teamed up with McDonald’s to introduce a line of ready-to-drink McCafe Frappes in grocery stores.
Still, it's no wonder that even with soda sales falling, the carbonated drink is a lucrative product for the companies that make it, and they are by no means giving up on it. At Coca-Cola, for example, soda is still responsible for about 70% of sales.
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 millennials and other soda drinkers. The world's largest non-alcoholic beverage maker in April announced a 5% jump in organic sales growth for its most recent quarter. Soda volume alone jumped 4%.
Although adding new flavors, packaging or marketing efforts may bring some interest to the stagnated carbonated beverage segment, no one can say whether the changes will be enough to turn around or stabilize soda’s future around.
It's clear that soda isn't going anywhere even if its popularity isn't as strong as it once was. Beverage makers are wise to turn to new flavors, sweetener substitutes and smaller sized cans to keep or get back consumers who have fled the beverage. At the same time, they're smart to invest more in water, teas, coffees and other good-for-you products. This seems to be working, and so it would not be a surprise to see the large beverage players stick to these strategies going forward.
- Bloomberg News Bottled Water, Soda Provide the Pop in U.S.