Soda sales go flat: What's next for the industry?
The big soda manufacturers -- a group that includes Coca-Cola (KO), PepsiCo (PEP) and Dr Pepper Snapple Group (DPS) -- are expanding internationally as soda sales in the U.S. continue to fall.
Tristan Donovan, author of Fizz: How Soda Shook Up the World, says that infiltration into emerging economies is what keeps these companies growing.
Soda companies are determined "to get into countries that have barely developed…If one day North Korea opens itself up to the world Coca-Cola and Pepsi are probably going to be the first two companies from America to go in," he says.
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In fact, there are only two countries in the world where Coca-Cola doesn’t do business: Cuba and North Korea. Defectors from North Korea, however, have reported that the soft drink has been available in the country for at least a decade.
Emerging markets have long been growth areas for soda companies; Big Soda has targeted countries like China and India to make up for a seven-year decline in American soda sales. Coca-Cola generates about 60% of its revenues from international markets and PepsiCo generates 50% of its revenue from abroad.
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Soda is now largely considered unhealthy and a main contributor to the country’s growing obesity crisis in the U.S. Soft drink sales declined by 3.3% in 2013 according to Nielson. In 2012, soda sales in the U.S. declined by 0.6% and by 1.8% in terms of volume.
Big Soda is rapidly expanding in order to meet the demands of the American public.
“There’s also the prospect of new low-calorie sweeteners that are natural rather than artificial,” says Donovan. Diet soda, however, is also on the decline with sales falling by 6.8% in 2013.
In a way, says Donovan, “these companies are losing market share to themselves.” The major soda manufacturers are diversfying their product portfolios: Coca-Cola, for example, also owns Aquapure, Dasani, FUZE, Vitaminwater, Honest Tea, Odwalla and Powerade. PepsiCo owns Aquafina, Naked Juice, Tropicana, Gatorade and Lipton. Dr Pepper Snapple Group owns DejaBlue water, Motts and Nantucket Nectars.
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“Cola companies aren’t just soda companies anymore...they make all kinds of beverages,” explains Donovan.
Even with declining U.S. soda sales, small local companies are creating craft sodas with natural ingredients that target health-conscious consumers.
“There’s little soda companies forming around the country and this might be a more appealing way that gets away from the health problems and artificiality that come with soda. It makes it more rootsy and homegrown and appealing,” says Donovan.
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