Consumers Aren't Drinking Like They Used to...Carbonated Beverages, That Is
By Al McClain
As everyone in the retailing industry must know by now, sales of carbonated beverages are off. According to recent Morgan Stanley research by analyst Bill Pecoriello as reported in Ad Age and on CNN/Money, soda volume is expected to decline 1.5 percent annually for the foreseeable future. And Ad Age calculates that noncarbonated beverage sales (bottled water, sports drinks, energy drinks, tea) could surpass those of carbonated beverages in 7 years.
The Morgan Stanley poll of 1550 consumers showed that teens are drinking less soft drinks and bottled water compared to adults, and more juice, sports drinks, and energy drinks. Five of the top ten beverage brands are now noncarbonated - Gatorade, Minute Maid, Tropicana, Aquafina and Dasani. And Gatorade is about to overtake Sprite for #5. Plus, all three billion-dollar new beverages of the past 25 years are non-carbonated - Gatorade, Nestle Waters, and Red Bull.
Overall, U.S. carbonated soda sales declined 0.2 percent in 2005 (Beverage Digest) and Beverage Marketing has forecasted a 0.6 percent drop for this year, leaving carbonated beverages with a 52.9 percent beverage share. (Meanwhile, a report earlier this year on FoodNavigator.com said that sales in Eastern Europe grew 7 percent in 2004, while Asia, Central and South America, the Middle East, and Africa all grew 3-4 percent).
Analysts explain that energy drinks are successfully using the internet, viral marketing, etc. to gain youth drinkers. Obviously, there is also the issue of obesity, and the tendency of late for schools to ban the sale of various types of beverages.
Worst of all for soda marketers could be that sodas aren't "cool" any more with the youth market. The Morgan Stanley research shows that 13-17 year olds drink less carbonated beverages than the overall population, and analyst Pecoriello believes that, when teens become adults, they are likely to become more health conscious and unlikely to drink more soft drinks.
Moderator's Comment: How can mainstream retailers sort out consumption trends that are having such a huge impact on this category? Should retailers strictly focus on what SKUs move today, or can they do anything to anticipate the trends in this mega-category and sell more of what consumers want, and are going to want?
There have been many food and beverage products that were predicted to be on the way out or in over the years, only to make remarkable course corrections. Eggs, coffee, low-carbs, protein, low-fat, beef, chicken, tuna, wine, and beer are just some categories that come to mind. They've all experienced wide swings in one direction or both directions in recent years.
The trick in this case is figuring out what's going to happen next. One thing is certain - there won't be a decline of 1.5 percent a year indefinitely - either the pace will accelerate, or something will tip back in the other direction to make soft drinks cool again, and away we go. Maybe teenagers will start drinking them because they're "bad" for you, for example. - Al McClain - Moderator