Watershed for Soda

Consumer Thirst for Energy Drinks, H2O Causes Cola Slide

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CHICAGO (AdAge.com) -- Kiss the cola wars goodbye, today it's sodas versus the world.

Now that carbonated soft-drink volume has fallen for the first time in 20 years, Coca-Cola and Pepsi-Cola have a mutual enemy: the rising tide of soda phobia from health-conscious consumers.

Consumers increasingly quenching their thirst with water and energy drinks bought 0.2% fewer fizzy drinks in 2005, according to Beverage Digest. Had the figures excluded energy drinks like Red Bull and Monster, the volume drop for carbonated beverages would have been steeper, down 0.7%. What's more, Morgan Stanley beverage analyst Bill Pecoriello estimates volume will slip at rate of 1% over the next few years.

Nor have diet drinks been the market's salvation. Despite a plethora of new products and extensions, sales of zero-calorie beverages are also fizzling, according to Information Resources Inc. data. Diet carbonated soft-drink volume declined 6% during the fourth quarter of last year, a big reversal from the 8% volume gain during late 2004.

Meanwhile, energy-drink volume soared 84.3% last year in supermarkets, drug and mass merchants excluding Wal-Mart and in bars and restaurants. And bottled water per capita consumption grew 49% to 25.7 gallons between 2000 and 2005, according to Beverage Marketing Corp.

Downplaying the shift
Share leaders Coke and Pepsi downplayed the historic shift.

"PepsiCo's total beverage portfolio in North America grew 4.2% in 2005," said a Pepsi-Cola spokesman. "That's more than a full point faster than our prior-year growth and more than double our primary competitor's '05 increase."

"The soft drink category is so massive, it would take 100 years for energy drinks to be as big as soft drinks," said Alison Lewis, senior VP-integrated marketing for Coca Cola Co., responding to a question from the audience at a marketing convention. "From a total market perspective, the worst thing [soft-drink marketers] could do is to say the sky is falling, the sky is falling."

With 55% of the total gallon sales of carbonated soft drinks coming from Coca-Cola-trademarked drinks, Coke executives maintain a bullish outlook even as the company hedges its bets by broadening its beverage stable with everything from waters to milk-based drinks. The company last month bowed a heavily supported media campaign called "Make every drop count" via Leo Burnett, Chicago, to tout that diversity.

Others players preach moderation. "My daughter is allowed to have one Jones per week," said Peter van Stolk, president-CEO of carbonated beverage marketer Jones Soda Co. "That's the rule because it's a treat."

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