ATLANTA -- For decades, Coca-Cola and Pepsi have been butting heads for shelf space on the soda aisles of grocery stores, convenience stores, gas stations, pharmacies and supercenters. But the rivalry is moving well beyond soft-drinks, said The Atlanta-Journal Constitution. The "Cola Wars" have spread to juices, teas, waters, sports drinks, energy drinks and ready-to-drink (RTD) coffees, said the report.
With U.S. sales of carbonated soft drinks on the decline for three years straight, industry executives and experts predict more expansion to come as Coca-Cola, Pepsi and their respective [image-nocss] bottling partners look to boost profits and volume in their home market.
The changes have been driven by consumers searching for healthier options and also showing a strong interest in a wider variety of beverages, John Sicher of Beverage Digest told the newspaper.
U.S. consumers are buying fewer soft drinks and more beverages such as teas, waters and energy drinks, the report said. Noncarbonated beverages have grown in the past five years from about one-quarter to one-third of the nonalcoholic beverage market, Beverage Digest data cited by the newspaper showed.
Instead of pushing a few mega-brands of soda, beverage companies are having to manage a complex portfolio of drinks, Sicher added.
Since 2000, Coca-Cola Enterprises (CCE) has doubled the number of stock keeping units, or SKUs, it delivers to 420. Each SKU represents a distinct beverage and packaging size. In that same time, the Pepsi Bottling Group, PepsiCo's largest bottler, has seen its SKUs double to 450. In the next 10 years, the number could grow to more than 1,000 SKUs for a major bottler, Sicher predicted.
"The industry is changing dramatically," he told the paper. "It's gone from an industry which 20 years ago was all about marketing a relatively small number of brands to an industry where the premium is really on things like smart innovation and excellent logistical execution by the bottlers."
Pepsi was first to diversify. It signed joint ventures with Lipton in 1991 and Starbucks in 1994. It acquired SoBe in 2000 and Gatorade in 2001. These moves have given Pepsi the lead in teas, RTD coffees and sports drinks, according to Beverage Digest.
In the past year, however, Coca-Cola has countered by buying Glaceau enhanced waters and Fuze juice drinks. It reached agreements for Campbell's juice drinks and Caribou and Godiva bottled coffees. Another RTD coffee, under the Illy brand, is expected to be offered in North America in 2008 or 2009. CCE has added recent creations, such as Rockstar Roasted Latte and a pink-colored Powerade Strawberry Lemonade, in the past few months.
The Coca-Cola system also has extended and repackaged major soft-drink brands. CCE is now delivering Coke Classic, Diet Coke and Coke Zero to Atlanta-area restaurants in contoured aluminum bottles, said the report.
Coca-Cola and Pepsi are constantly trying to gain an upper-hand in even the smallest outlets, searching for nuances or trends to determine the right product mix, Terry Marks, president of CCE's North America group, told the paper. A c-store near a gym, for example, might be a good place for Vitaminwater.
"It's a street fight," Marks said. "It's the knowledge of what's in that area that enables the account manager to make the right decisions because he or she knows the shoppers in that area."Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.