• by Karlene Lukovitz  @KLmarketdaily, February 14, 2007

While carbonated beverages and milk remain the two largest consumer packaged goods categories, their sales continue to be eroded by consumers' growing preference for bottled water and non-carbonated options like ready-to-drink teas and coffees.

Last year, carbonated beverages and milk were the only categories among the 10 largest CPG categories to show sales declines, with losses of 0.1% and 2% respectively, according to Information Resources, Inc.'s "2006 CPG Year in Review" report.

Whole milk sales dropped 6.5%, and skim/lowfat milk sales were flat. (While the data may be enough to curdle the blood of traditional dairy marketers, sales of kefir/milk substitutes/soy milk and milkshakes/non-dairy drinks rose by 7.7% and 6.3%, respectively.)

Meanwhile, sales of bottled water (which ranked tenth among the top 10 categories by total sales) jumped 12.3%.

That performance also won bottled water the No. 3 ranking among the top 10 CPG growth categories for 2006 -- and water was far from the only beverage that made the top-growth list.

Ready-to-drink tea/coffee, with a charged-up 28.2% sales increase, was the No. 1 growth performer. Sports drinks ranked fourth (up 11.8%), and wine ranked fifth (up 9.3%).

IRI attributes the upswings in sales of coffees/teas, sports drinks and bottled waters to consumer perceptions of health benefits associated with ingredients such as ginseng, green tea and white tea. "Product innovation around these types of attributes is high, and will likely gain momentum in 2007," IRI adds.

But health benefits and non-carbonation are clearly not the only factors influencing consumers' beverage choices. In addition to the wine category's gains, sales of beer -- the third-largest CPG category by total sales -- rose by 2% last year. Sales losses among domestic beer varieties were more than outweighed by strong growth for microbrews (up 16.9%) and imported brands (up 10.9%).