Soft-Drink Sales Volume Continues to Decline

Carbonated Colas Drag Down Beverage Category; Bottle Water, Energy Drinks Gain Market Share

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NEW YORK (AdAge.com) -- Americans continue to shun carbonated soft drinks, leading to the fourth consecutive year of volume declines in the category. Consumers are drinking the same amount of soft drinks they did more than a decade ago.

Volume declines in 2008 were more a symptom of ongoing issues within the carbonated soft drink category, rather than a one-time decline related to economic woes.
Volume declines in 2008 were more a symptom of ongoing issues within the carbonated soft drink category, rather than a one-time decline related to economic woes. Credit: AP
In 2008, category volume, as defined by cases sold, declined by 3%, according to data released today by Beverage Digest, and declines over the past four years have now eliminated gains made in the eight years prior to that, bringing the category back to 1997 volume levels. The data includes energy drinks and captures all channels, including retail, fountain and vending machines.

"Carbonated soft drinks are definitely a drag right now [on the entire beverage category]," said John Sicher, editor and publisher of Beverage Digest. "The category is so big and the rate of decline is worsening."

Mr. Sicher acknowledged that the economy had a modest impact on carbonated soft drinks. High gas prices last summer, for example, caused sales at convenience stores to slow. Still, volume declines in 2008 were more a symptom of ongoing issues within the category, rather than a one-time decline related to economic woes. "We're not going to see carbonated soft drinks turn around anytime soon," Mr. Sicher said. "The big challenge for Coke, Pepsi and [Dr Pepper Snapple] is to get their soda business back at least to flat, so it doesn't drag down the overall industry."

According to data released today by Beverage Marketing Corp., carbonated soft drinks account for 47.5% of the beverage category's volume, down 0.5% from 2007. The next largest segment, bottled water, accounts for only 29%.

Many beverage segments saw volume declines in 2008, though there were a few notable exceptions. Flavored and enhanced water gained 8.3% volume and energy drinks gained 9% volume. Those two categories, along with bottled water, also gained market share. The beverage category as a whole saw volume decline 2%.

In the carbonated soft-drink segment, price increases and growth among premium-priced energy drinks are offsetting volume declines, to some extent. The retail value of the business rose 1% to $72.7 billion, but it's unclear whether prices will continue to increase to make up for lost volume. Commodity costs, however, which were blamed for some increases last year, do appear to be less of an issue going forward. And with private-label brands gaining ground with some consumers, continued price increases would seem unwise.

Among soft-drink companies, Coca-Cola and PepsiCo lost share, while Dr Pepper Snapple and Red Bull gained share.

Within the top 10 carbonated soft-drink brands, brand Coke gained 0.1 share points, while Pepsi lost 0.4 share points. Mtn Dew, Diet Mtn Dew and Dr Pepper all gained share, while Diet Pepsi lost. Diet Coke, Sprite, Fanta and Diet Dr Pepper were flat. Coke Zero has nearly cracked the top 10, Mr. Sicher said, following huge growth in 2008.

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