The decline of soda
Over the last 20 years, sales of soda in the United States have plummeted by more than 25 percent, with per capita consumption falling to a 31-year low. Soda consumption, which rocketed from the 1960s through 1990s, is now experiencing a serious and sustained decline.
Sales are stagnating because a growing number of Americans are actively trying to avoid the drinks that have been a mainstay of American culture.
A bird’s-eye view of industry numbers
In 2016, each person in the United States drank 39.3 gallons of bottled water, compared with 38.5 gallons of carbonated soft drinks, according to data from Beverage Marketing Corp., Reuters reported.
(Image via: Beverage Marketing Corporation)
That’s a dramatic drop for soda consumption from its heights in the late 1990s and early 2000s of over 50 gallons per person.
On the other hand, sales of bottled water have shot up, and bottled water is now on track to overtake soda as the largest beverage category in two years.
Lifestyle changes behind those statistics
These changes are not accidents. They have occurred, in part, to a loud campaign to eradicate sodas. The debate about the consumption of carbonated soft drinks, along with a series of related city policies, helped discourage people from drinking soda.
For many public health advocates, soda has become the new tobacco – a toxic product to be banned, taxed and stigmatized.
Many workplaces and government offices have prohibited their sale, while school cafeterias and vending machines no longer contain regular sodas.
For instance, the Philadelphia school district forbids the sales of sugary beverages in schools and limits their availability in public vending machines. The city also provides financial incentives for corner stores to highlight healthy foods. In addition, it sends educators into public school classrooms to teach children about nutrition.
(Image via: The New York Times)
The public health community has coalesced around an anti-soda message. Health officials and industry experts alike agree that public attitudes about soda and consumer tastes are shifting in ways that may be permanent.
Water has been the runaway success story of the industry. “The beverage industry has undergone a seismic shift,” said Michael Bellas, Chief Executive Officer of Beverage Marketing Corp. “Bottled water’s emergence as the No. 1 beverage type clearly signals a fundamental change in what consumers want from their beverages.”
How the beverage industry is responding
The current anti-soda sentiment has the big soda makers worried. But they are also aware that after decades of selling a handful of popular, iconic products, changing public attitudes are leading to a profound change in the nature of the business.
“Health and wellness is a major enduring trend, and each brand has to compete in that environment,” said J. Alexander M. Douglas Jr., president of Coca-Cola North America, at a Goldman Sachs investor event in May.
1. Segmented revenue approach
Coca-Cola executives maintained that the company is coming up with solutions for the fact that consumers around the world are drinking less sparkling beverages.
“We believe in our segmented revenue approach. It’s not that we’ve forgotten about volume or don’t believe in an underlying driver in the long-term, particularly in developing markets,” COO James Quincey said. “In North America and some other developed markets, clearly we’re going after more of a revenue strategy that’s driven by smaller packages, pricing actions.”
(Image via: Business Insider)
In a Q&A released by Coca-Cola, Quincey said that this approach was working in North America, even if Americans are cutting their soda consumption.
“In markets like North America, we are moving towards selling smaller packages instead of bigger packages,” he said. “Thanks in large part to this strategy, our North America business had another strong quarter.”
2. Healthier offers
In addition to focusing on selling smaller cans and bottles of soda, the industry is also trying to combat falling soda consumption through investments in teas, juices, and bottled water.
In fact, both Coca-Cola and PepsiCo have each sought to remake their portfolio to be more on trend with what Americans are drinking today.
Coca-Cola customers can expect the roll out of sparkling Minute Maid and sparkling Smartwater, while Pepsi is launching products like an organic Gatorade, new Aquafina flavored waters, and healthy vending machines.
The sales of Dasani and Aquafina, owned by Coca-Cola and PepsiCo respectively, have grown steadily in the last year.
In time to come, perhaps Coca-Cola and PepsiCo will launch more innovative and creative solutions to gain marketing share among health-conscious consumers. Healthy beverages will take center stage, especially drinks that emphasize positive health benefits, instead of cutting calories, sugar, or sodium.
For now, it’s safe to say that the glory days of soda have come to an end. “There will always be soda, but I think the era of it being acceptable for kids to drink soda all day long is passing, slowly,” said Marion Nestle, a professor of nutrition at New York University. “In some socioeconomic groups, it’s over.”