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Graph: The End of Soda and the Rise of Coffee

Derek Thompson

Ten years ago, Americans drank enough soda every year to fill a small aquarium. Fifty-three gallons of the stuff. Or, about half a liter of fizz, every day, on an average day. Compare that figure our other favorite liquid-caffeine companion. For every cup of coffee we consumed in 2003, we drank two cups of soft drinks. For every dollar we spent on joe, we spent four bucks on soda.

Now look where we are: Soda is in a free fall, with domestic revenue down 40%. Coffee culture is ascendant, and revenue is up 50% in ten years. In another decade, the United States could easily spend more on coffee than soda, even though that was unthinkable at the turn of the century (data via IBISWorld):

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Four factors behind this remarkable caffeinated convergence:

(1) The health thing. This is the most obvious and it barely requires summary. Soda ain't cigarettes, but sugary soft drinks have faced a similar cultural and political backlash recently. As obsessively healthy attitudes have osmosed from yoga yuppies to the general population, local governments have turned on soda, pressing school bans and cup-volume limits. Fading consumer sentiment has had twin impacts: pushing soda drinkers to switch to cheaper brands and encouraging soda companies to shift toward diet drinks, smaller bottles, and alternative drinks, according to IBISWorld.

(2) The water and energy-drink craze. Americans drink about 180 gallons of liquid every year. That number is basically fixed. For example, when a soda drinker decides she wants to drink iced tea with lunch from now on, she's not likely to order a Diet Coke and an iced tea. She'll just switch from Coke to tea. (The economic term for swapping one product for another is called, simply, substitution.) When we drink more of one kind of beverage -- bottled water sales are up 50 percent in the last decade; sports and energy drink sales are up 100 percent -- those gains are another drink's pains. The rise of energy drinks is especially important because energy drinks directly replace (substitute) soft drinks among customers who buy Diet Coke and its ilk for an afternoon pick-up. Americans still drink more soda than any other "category" of drink, like milk or juice. But the gap is fading quickly.

(3) Ascendant coffee culture. Coffee consumption in the U.S. is basically flat, after two decades when Starbucks and other national coffee shops sprouted like a steroidal ragweed along urban and suburban sidewalks. But young consumers haven't yet had their fix, and as this demographic trades up for more expensive coffee when the economy recovers, IBISWorld projects the overall industry to continue buzzing. Just as studies showing the ill effects of sugary drinks have hurt soda, studies showing we can basically drink as much coffee have perhaps encouraged young people to go back for refills. Consumption has increased the most for consumer between 18 and 24, IBISWorld finds, and "younger consumers are more likely to drink coffee on a daily basis today than five years ago" and the most likely to drink espresso drinks. Starbucks has taught them well.

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(4) Rising coffee prices. Coffee's growth isn't just a matter of trading up to more expensive lattes, it's also a case of paying more each year for the same cup. "Much of the revenue growth in the past five years was stimulated by a 14.1% annualized increase in the world price of coffee," which were mostly passed on to customers, IBISWorld found.

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