NEW YORK -- A decline in U.S. soft-drink sales volume accelerated sharply last year, as The Coca-Cola Co., PepsiCo Inc. and other beverage companies failed to overcome flagging consumer interest in big soda brands and grappled with rising commodity costs that pushed the prices of those drinks higher, reported The Wall Street Journal.
U.S. soft-drink volume fell 2.3%, according to the report, citing Beverage Digest. The decline was considerably worse than 0.6% and 0.2% slips in 2006 and 2005, respectively, and erased gains in soda sales made since 2000.
The accelerated drop appeared [image-nocss] to be due to price increases of about 5% in the past year that have made soft drinks less attractive, coupled with continually growing consumer interest in newer drink categories such as enhanced waters and teas, Beverage Digest editor and publisher John Sicher, told the newspaper. While Coke and Pepsi market those drinks too, they make up a smaller percentage of overall volume than carbonated soft drinks. "These companies have to redouble their efforts to find new beverages and new ways to replace the lost soda volume," Sicher said.
The carbonated soft-drink volume results would have been "at least several tenths of a percentage point worse" had they not included sales of energy drinks, added Sicher. While energy-drink sales pale in size to sales of big soft-drink brands such as Coca-Cola and Pepsi, they represent one of the fastest-growing beverage segments.
The retail value of the U.S. carbonated soft-drink industry rose 2.7% to $72 billion, reflecting both the price increases on soft drinks and the growth of energy drinks, which are premium-priced. U.S. annual per capita consumption of soft drinks remains the highest in the world, at 789 8-oz. servings last year, down from 849 servings in 2000.
Coca-Cola and PepsiCo's soft-drink volumes fell 2.7% each, and each company's share of the U.S. carbonated soft-drink market slipped 0.1 percentage point—to 42.8% for Coca-Cola, the U.S.'s largest seller of soft drinks, and 31.1% for second-largest Pepsi. The third-largest soft-drink maker, Cadbury Schweppes PLC, also saw its sales volume drop, but its market share rose 0.1 percentage point to 15%. Volume for Cott Corp., the fourth-largest beverage maker, which produces private-label beverages for Wal-Mart and other retailers, fell 8.5% and its market share slipped 0.3 percentage point.
Among the top 10 selling soda brands, only Diet Mountain Dew, marketed by PepsiCo, and Diet Dr Pepper, marketed by Cadbury, posted volume growth. The top two brands, Coca-Cola Classic and Pepsi-Cola, continued to slide, with Coke volume slipping 3% and Pepsi volume falling 4.8%. Some smaller brands posted healthy growth: volume of Coca-Cola Zero, a diet cola, rose 37.5%.
Coca-Cola spokesperson Dan Schafer told the Journal that the company is making headway on accelerating carbonated soft-drink sales. "Our sparkling-beverage category showed sequential improvement during the year," he said. "We're confident we've got the right strategies."
Dave DeCecco, a spokesperson for PepsiCo, which dominates noncarbonated-drink sales, said the company is continuing to expand its overall beverage portfolio. "In 2007 we outperformed our nearest competitor, and we expect to gain share in 2008," he told the paper.
The slipping soda sales and a slowdown in volume growth of bottled water mean that overall beverage sales slowed for the major companies, Beverage Digest said. Coca-Cola's combined carbonated and noncarbonated drink volume slipped 0.5%, while PepsiCo's overall volume rose 0.1%, thanks mostly to strong growth of its Lipton tea brand.
The U.S. market for nonalcoholic beverages—including soda, bottled water, sports drinks, fruit drinks, energy drinks and other drinks—rose just 1.3%, according to the report, citing Beverage Marketing Corp., an industry consulting firm that also released data yesterday.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.