Drinks giants under pressure in US

22 March 2012

NEW YORK: Brand owners in the US carbonated beverages sector are facing major challenges as consumer demand continues to fall, a report has shown.

Beverage Digest, the industry title, reported that volume sales of carbonated soft drinks contracted by 1% to 9.2bn cases in 2011, double the pace of the decrease registered in 2010.

Totals on this measure stood at the level logged in 1996. Indeed, having seen regular annual growth of approximately 3% in the 1990s, the segment has shrunk each year since 2005.

Excluding energy drinks, carbonated drink sales would have fallen by 1.5%. "Carbonated soft drinks, while still the biggest category, are playing a declining role in Americans' beverage consumption," Beverage Digest said.

In evidence of this, the typical US shopper drank 714 eight-ounce carbonated drinks in 2011, down from 728 in 2010, marking the lowest numbers on record since 1987.

Despite this, retail revenues climbed by 2% to $75.7bn last year, largely due to a 3% price increase, although such a trend may also have contributed to softening volume returns.

When including all types of bottled drink, Coca-Cola held a market share of 34%, ahead of PepsiCo on around 27%, Dr Pepper Snapple on 11% and Nestlé Waters North America on 10%.

At the brand level, Coke - in all varieties - retained the lead position but witnessed a 1.5% contraction in annual volume sales, while Pepsi endured a 5.5% decline.

Mountain Dew, also owned by PepsiCo, was off by 1%. PepsiCo recently announced plans to boost the adspend for 12 key beverage brands to revive this aspect of its portfolio.

"Pepsi has now gotten behind their core soda brands," said John Sicher, editor and publisher of Beverage Digest. "But beginning to improve results will take at least a year or two, just as it took Coke a year or two in the middle part of the last decade."

Elsewhere, Dr Pepper delivered a modest 0.3% lift, and Gatorade, PepsiCo's sports drink, enjoyed an 8.1% expansion. Sprite, manufactured by Coca-Cola, was off by 0.6%.

Two Nestlé brands followed next in the volume rankings: Pure Life, down 0.2%, and Poland Spring, slipping by 1.8%. Tropicana, made by PepsiCo, saw a 5.2% slide but Coca-Cola's Dasani, making up the top ten, benefited from a 7.5% leap.

Data sourced from Financial Times, Reuters, CNN, AdAge; additional content by Warc staff