New, hard reality hits soft drinks

BEVERAGES: Volume sales, category share of carbonated brands slip; 'hybrid' offerings like coffee colas look to be the next wave

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Coke is no longer It and Pepsi is no longer the choice of a new generation.

U.S. carbonated soft-drink volume fell for the first time in 2005, by 0.6%, according to Beverage Marketing Corp. as fizzy drinks' share of total beverage gallonage slumped to 52.9%, down 2 percentage points from the prior year.

"Carbonated soft drinks have moved beyond their century-plus-long mission of supplying consumers with refreshment as be-all and end-all," Michael C. Bellas, chairman-CEO of Beverage Marketing, said at last month's Beverage Forum. "Rather, the industry is rapidly migrating to a series of hybrid beverages that combine the attribute of multiple beverages into one, including carbonated energy beverages, coffee colas and mood enhancement waters."

Today's consumer, says Mr. Bellas, is no longer motivated to try a beverage based on the three historical "need states" of simple refreshment, rehydration and basic nutrition. Coca-Cola Co. identified at least 22 motivations last fall when it unveiled a niche-driven strategy.

The drinks consumers are increasingly reaching for are water, sports drinks, energy drinks, ready-to-drink teas and coffee. PepsiCo's Aquafina was the fastest-growing brand in Beverage Marketing's top 10 at a 29.2% volume gain in 2005. Coca-Cola's Dasani grew 26.9% in volume, and Pepsi's Gatorade advanced 21.5%. Conversely, four of the top five sodas declined. Certainly, smaller segments grow the fastest.

Marketers were most prolific in launching coffee beverages, with 306 new products in 2005. Energy and sports drinks saw 193 new products, and water grew by 140, according to Mintel.


As marketers become better at diversifying their products for specific needs, traditional carbonated sodas take on a greater stigma of having empty calories, says David Morris, analyst for Mintel. In reality, coffee, energy and sports drinks often contain more sugar, calories and caffeine than carbonated soft drinks.

"[Consumers] are seeking potions rather than thirst quenchers," says Tim Stock, managing director of brand think-tank ScenarioDNA. "[Consumer] choices speak to their awareness of ingredients and products. They quickly latch onto ingredients that give them a quick fix, say high-doses of caffeine, taurine, vitamins, antioxidants, you name it. It's not really about health. I'd liken it more to fad dieting."
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