Soda sales continue to fall flat

The industry recognized this trend early on. Beverage makers have been adding sports drinks and fruit juices to their product lineups for years.

By Jonathan Berr Jan 21, 2013 4:23PM
Credit: The Coca-Cola Company
Caption: ‘Stay Extraordinary’ can designFor increasing numbers of people, Coke is not "it." Pepsi is not the "choice of a new generation" and consumers are definitely not "feeling 7 Up." In fact, soda consumption has been on the decline for eight years and the trend shows no signs of easing.

Sales of soda fell 0.6% last year to $28.7 billion, according to data from the SymphonyIRI Group cited by the Wall Street Journal. Volumes fell 1.8%. In contrast, energy drinks, which some experts say have been linked to health problems, posted a 14.6% gain, according to Supermarket News.
"Soda companies raised prices aggressively in 2011 after commodity costs surged," the paper said. "Prices were increased a bit in late 2012, but volumes fell even more sharply."

(KO), PepsiCo (PEP) and Dr Pepper Snapple (DPS), the three largest soda companies, have been adding higher-growth products such as sports drinks and fruit juices to their product lineups for years to compensate for the waning popularity of carbonated beverages. 

For instance, Coca-Cola acquired Vitaminwater maker Glaceau for $4.2 billion in 2007.   PepsiCo went even further afield, buying Quaker Oats for $13.4 billion in 2001 and Naked Juice in 2006. Snapple has changed hands several times since 1997 before it wound up under its current ownership.

The reasons for soda's decline are many. Consumers are certainly more health conscious than they used to be, and public health experts have been raising the alarm bells about the links between consumption of sugary soda and obesity. New York Mayor Michael Bloomberg last year pushed through restrictions on sales of large-sized sodas and sugary drinks. Other mayors such as Philadelphia's Michael Nutter have tried and failed to impose soda taxes to help defray the health care costs associated with obesity.

But even as the soda industry claims that soda sales are falling, critics say that among some groups -- especially children -- consumption is rising.

"From 1989 to 2008, calories from sugary beverages increased by 60% in children ages 6 to 11, from 130 to 209 calories per day, and the percentage of children consuming them rose from 79% to 91%," according to the Harvard School of Public Health. "On any given day, half the people in the U.S. consume sugary drinks; 1 in 4 get at least 200 calories from such drinks; and 5% get at least 567 calories—equivalent to four cans of soda."

The beverage industry has responded to these critics by making the nutritional labeling on its products more clear. It also has made healthier choices available to schools. Activists, though, say the industry needs to do more.

Blaming the nation's obesity epidemic -- which costs about $190 billion to treat annually -- on one food such as soda overlooks a slew of other factors ranging from lack of exercise to genetics that also explain why people become overweight and stay that way.  

--Jonathan Berr owns a small position in Coca-Cola. Follow him on Twitter @jdberr.

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