Difficult Road Ahead For Carbonated Drinks

As the country has slowly pulled itself out of recession, a number of changes have taken place with consumers. The most apparent is spending habits, which is not unusual given the severity of the recession. One change, however, that has no apparent relevance to the recession is a greater interest in healthful eating. 

Indeed, recent federal data show a 43% drop in obesity rates for 2-5 year olds for the past 10 years. Unfortunately, that statistic isn’t reflected in the population as a whole, but it is a start. Reasons are unclear, but improved school nutrition and exercise programs may be part of it. Whenever nutrition comes up—and other recent studies show that it comes up a lot these days—carbonated soft drinks (CSDs) are a major topic. Once a seemingly rock-solid category, CSDs have seen some significant sales declines recently. Nielsen data show that regular soda sales have dropped by roughly 2% in the last year, but diet soda has plummeted nearly 7% in that same period. 



This isn’t a matter of Coke beating Pepsi—both are struggling. And while CSDs still move massive quantities, there are some cracks in the armor. Many of these cracks seem to have started as grass-roots efforts from a vocal and growing health-conscious sector. The concerns are concentrated on the overall health impacts of artificial sweeteners used in diet soft drinks. The generational shift has been a major driver here; a recent Mintel survey found that a majority of those under 35 believed artificial sweeteners are unhealthy. 

Additionally, recent studies have concluded that switching from sugary drinks to a diet version doesn’t contribute to weight loss, effectively eliminating the primary reason for diet drinks. Medical journal Trends in Endocrinology and Metabolism recently published an opinion paper that presents an even more negative perspective: everyday consumption of diet soft drinks can initiate “metabolic derangements” that inhibit our ability to manage our caloric intake. Additional research has outlined possible ties between diet soda and heart disease, diabetes and obesity. And finally, the caramel coloring used in virtually all soft drinks, whether diet or not, has been shown to be a possible carcinogen.

This all boils down to a significant PR problem for carbonated soft drinks, and it now appears that after a generation of growth, the current decline in sales will not only continue, it’s likely to accelerate. Some groups are advocating warning labels much like those on cigarettes to call out the health concerns, which would have a potentially devastating effect on sales. 

As the generational dominance shifts from Boomers to Millennials, ordering a carbonated soft drink with lunch is no longer the default choice. In addition, trotting out the usual tactics for building brand awareness and loyalty isn’t necessarily the best route. Diet Coke has enlisted Taylor Swift in an effort to regain relevance, but the target market isn’t as easily influenced as their parents and grandparents were. They are less attentive to advertising and more cynical about it.

What is clear is that a greater variety of products is needed to respond to the changing desires of the market; the default drink in 5 or 10 years might not be a CSD at all. It’s quite possible, even likely, that there will not be a default drink, and the only way to maintain market share will be with a massive selection, an extremely efficient means of distribution, and an ear held very close to the market listening for the inevitable changes.

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