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Soft drink sales slide as alternatives boom

The writing may be on the wall — or on the label — for the soft drinks industry.

For years now alternatives to traditional carbonated soft drinks — sports drinks, energy drinks, enriched drinks, nutraceuticals and water — have been making raids into the land of the once-indomitable soft drink giants. In March, however, there was a significant indicator that the shift to such drinks is becoming permanent: The Beverage Digest reported that for the first time in 20 years, the number of cases of soft drinks sold in the US was down — two per cent for Coca Cola Classic, and 3.2 per cent for Pepsi.

The reasons are many: consumer desire for variety; parents' campaigns to remove sugary soda and other unhealthy snacks from school vending machines; the flurry of media reports tying soft drinks to obesity; recent revelations that soft drinks contain high levels of the carcinogen benzene.

For instance, a recent article in the medical journal Pediatrics received widespread attention when it highlighted a 25-week study in which teenagers were offered alternatives to soft drinks, such as fruit juice or water. The results were striking: consumption of the high-calorie drinks went down by about 80 per cent by the end of the study, and the most overweight teenagers had significant reductions in their body mass indexes. And when in March the Food and Drug Administration and the Food Safety Administration found levels of benzene in soft drinks at eight times the level allowable in drinking water, alarm bells sounded in such far-flung places as New Zealand and China, which then initiated their own testing.

Meanwhile, the growth in alternative drinks is expected to hit double digits. "The dynamic convergence of consumer taste preference for noncarbonated drinks, coupled with health and wellness prevention, as well as concern for obesity/type 2 diabetes has created the 'perfect storm' for carbonated soft drinks," said Donald Wilkes, president and CEO of Blue Pacific Flavors, a flavour manufacturer specializing in food product solutions. "This is not only true in the US, but in Asia, too. In Japan, ready-to-drink green tea sells as much as Coke. There's just much more nutritional awareness out there."

The shift is largely driven by external factors, said Gary Roethenbaugh of Zenith International, specialists in beverage market research. "If you step back and look at it objectively, you see that we're less active than ever. We live in temperature-controlled environments and have Play Stations. We're not burning as many calories as we used to, and we're beginning to understand we can't just take in all those calories from soft drinks anymore."

The bottom line: opportunity for creative drink manufacturers. "It's hard to predict where the next big thing will be," Roethenbaugh said, "but water is a huge growth area, and products that help with weight management, such as the Celsius brand being marketed in the US, or Jana Skinny Water, that use thermodynamics, raising body temperature, to metabolize calories."

"We expect to see lots of growth in functional drinks with real science behind them," Wilkes noted. "The UK is ripe for this. Consumers are more forensic there, looking for science and third-party validation of ingredients."

Sales are booming for up-and-coming functional beverage companies like Sambazon, a supplier of açai pulp and manufacturer of açai drinks. "We saw an increase of 200 per cent in same-source sales last year in our smoothie line," said Jeremy Black, Sambazon's global brand manager. Startups, such as Açai Distributors in California, are finding the path to success already paved, particularly in the grab-and-go sector. "We're reaping the benefits of longtime consumer education," said Valena Hernandez, part owner and operations manager. "When you see school vending machines that once had nothing but junk food now being stocked with Stonyfield Farms, that's amazing."

Retail sales of pomegranate juice, led by PomWonderful, climbed by 175 per cent last year to $60 million.

Guayaki, a yerba mate drink company holding 60 per cent market share, is another example. David Carr, co-founder and vice president of business development, said, "We've been in this business for about 10 years, but we launched our bottled product last June because we saw the opportunity was there. Consumer awareness is really growing quickly."

And perhaps a recent development within Carr's company speaks most portentously to the future of alternative drinks. "Our new vice president of marketing used to control the whole North American market for Coca Cola."

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