Consumers Not as Bubbly About Soft Drinks

Soft drinks continue to lose their fizz among consumers as bottled water and other noncarbonated drinks gain popularity.

Growth in the U.S. carbonated soft drink industry was relatively flat during 2001, and per-capita consumption of the bubbly beverages fell for the third year in a row, according to reports released Thursday by market research firms.

Traditional cola drinks continue to dominate the soft drink aisle, but shelf space is under assault by noncarbonated beverages, including the fast-growing bottled water sector. Market leader Coca-Cola Co.’s soft drink volume fell by 0.2% during 2001, while archrival PepsiCo Inc. earned a 1.3% volume increase, according to Beverage Digest, a Bedford Hills, N.Y.-based newsletter.

By contrast, Red Bull, an energy drink popular with younger people, registered a 118.8% increase in volume.

Although Pepsi’s existing diet drinks registered gains, the company drove additional sales with its new Mountain Dew Code Red and Pepsi Twist beverages, according to Gary A. Hemphill, vice president of Beverage Marketing Corp., a New York-based research firm.

Though best known for their carbonated brands, the nation’s two leading beverage companies got a huge boost from noncarbonated beverages. Pepsi’s noncarbonated sales, including juices and the fast-growing water sector, grew by 35%, while Coke’s noncarbonated sales rose by 23%, according to Beverage Marketing Corp.

Water brands provided most of that lift.

“Not to use a bad pun, but water clearly is draining volume from some of the other carbonated categories,” said John Sicher, editor and publisher of Beverage Digest. “The carbonated soft drink market grew by 0.6% in 2001, but we estimate growth in bottled water at 30%.”

The flagship cola brands--Coke Classic and Pepsi--still account for a third of all carbonated drink sales. Add the diet equivalents, and colas contribute half of the industry’s sales. But cola companies are scrambling to get a piece of the noncarbonated market. PepsiCo, for example, markets the Aquafina brand, while Coca-Cola sells Dasani bottled water.

Water, the trendy Mountain Dew Code Red and a growing number of juice and energy drinks are the beverage industry’s response to the increasingly diverse tastes of Americans.

During the early 1990s, the carbonated beverage industry enjoyed year-to-year growth in the 2% to 3% range. In recent years, however, the cola companies have been broadening their offerings to generate sales growth.