Positive Outlook for Carbonated Beverages

Carbonated soft drink sales dipped in 2010, but are expected to show positive growth in 2011.

“Because the economy is better and products like Coke Zero have done well with customers, we are predicting 2.3% growth in 2011 for carbonated beverages,” said Garima Goel Lal, senior consumer analyst for Mintel International.

Overall sales of carbonated beverages grew 9% from about $40.2 billion in 2005 to $43.9 billion in 2010, but when adjusted for inflation, sales actually declined 2%—due to lower demand for regular soda and a recent drop in the prices charged by several large retailers.

Deb Davis, category manager of cold beverages and frozen product for EZ Energy USA Inc., which operates nearly 100 stores in Ohio and Pennsylvania, has seen other beverage category sales taking a bite out of carbonated soft drink (CSD) sales.
“As a whole, U.S. consumption of CSDs has steadily declined since 2001,” Davis said. “I believe that the deterioration has entirely to do with the array of beverages now available to consumers.”

Davis pointed to ready-to-drink teas and energy drinks, which are impacting CSD sales more now than in the last few years. “As more health-conscience consumers are realizing the benefits of black tea, we are consistently seeing a spike in sales in this category,” she said. “Energy drinks are still showing growth, with the regular, full-calorie choices being in the top five SKUs of this category.”

Prices Increasing

Mintel International predicts U.S. soda sales will grow 15% in current prices and 6% in inflation-adjusted prices through 2015. The research firm also said overall consumption of soda by adults appears to be declining, with 38% of respondents to an August 2010 Mintel International survey reporting they are drinking less soda a year ago. Customers age 18-24 are the most frequent soda drinkers, the survey found.

One reason for the decline is financial, with about 30% of respondents reporting they were drinking less soda during the recession to save money. Some 30% also noted they are likely to continue buying “cheaper soda brands” after the recession ends, which could mean more opportunity for less expensive private-label products.

Goel Lal noted that while major brands have not come out with huge innovations, smaller players in the CSDs market are featuring more fruit flavors in soda, as well as more functional sodas and environmentally-friendly packaging.

Davis predicts the CSD category will decrease slightly in 2011 at EZ Energy stores, as the company limits the amount of space for branded products in its cooler doors.

“When we see companies that are focused on what is best for them, and not the consumer or their customer, we must act on what’s best for our stores,” Davis said. “Contrary to a desired CMA agreement, assortment is vital to every CMA agreement. We’ve seen an increase to vendor demands for space, and to this end, a lift in Coca-Cola sales is likely as we increase the SKUs not only in the cooler, but also in our fountain lineup.”

Beverage Sales Down in 2010

—Overall incidence of soda consumption dropped from 88% of adults in 2005 to 84% in 2008-2009. The incidence of drinking regular soda dipped from 71% to 69% during the same period while adults opting for diet held steady at 40%.

—Sales of regular soda in the supermarket, drug, mass excluding Wal-Mart (FDMx) channel declined 1.7% between 2008 and 2010. Meanwhile, sales of seltzer/tonic water/club soda increased by about 9% and sales of diet carbonated drinks increased 1.9%.

—Sales in the mass channel were estimated to increase 4% between 2008 and 2010 due to both operators selling soda at very low prices and customers frequenting mass merchandisers searching for bargains and one-stop shopping.

—Convenience store sales declined 3%.

—Sales supermarkets increased 3.5%,

—Sales in “other” channels rose 2.1%.

—Diet Coke, Diet Pepsi, Caffeine-Free Diet Coke and Diet Mountain Dew are the leading brands of diet carbonated soft drinks as measured by FDMx sales.

Source: MINTEL INTERNATIONAL

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