Carbonated Beverages - US - August 2010

About this report

Overall, sales growth of carbonated soft drinks (CSDs) has been generally stagnant in recent years due to rising demand for bottled water, functional beverages (including energy drinks) and some better-for-you (BFY) alternatives. However, a few brands have reported impressive growth in the last year due in part to new distribution agreements. Some manufacturers are also positioning their brands to capitalize on emerging taste preferences, while others have created innovative new social media and brand community initiatives that are truly engaging customers in the brand, thereby driving growth and garnering loyalty. Clearly, this is a very competitive time in the CSD market, yet it is also one in which companies with a keen focus on consumer attitudes and behavior can reap significant profits. In order to provide insight that can be used to help inform new product development, product refinement and marketing efforts, this report addresses the following questions:

* How have sales of CSDs fluctuated in recent years and how are they likely to change in the next five years?
* Which categories compete directly with CSDs and how are changes in pricing and retail distribution impacting overall sales?
* How are sales of seltzer/tonic water/club soda growing relative to sales of diet and regular carbonated soft drinks?
* How are health and wellness, as well as economic trends impacting the market?
* Who are the leading companies and what brands are performing well despite challenging market conditions?
* How are changes in the incidence and frequency of use impacting overall sales?
* How are perceptions of sweeteners including Stevia and High-Fructose Corn Syrup (HFCS) impacting sales?
* What factors motivate consumers to drink soda?
* What segments of the population continue to drink soda in large numbers and which are abandoning the category in greater numbers?

Table of contents

Scope and Themes
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Advertising creative
Abbreviations and terms
Abbreviations
Terms
Executive Summary
Regular category popular but sales declining; seltzer posts strong growth
Carbonated juice and energy among primary competitive threats
Regular soda declines while diet soda and seltzer water/natural soda posts growth in FDMx
Convenience stores and supermarket primary channels
Wellness trend leveling off but still undermining growth of some brands
Diet Coke and Pepsi remain at top of diet segment
Schweppes, Canada Dry and Polar hold share in seltzer/tonic water/club soda segment
Usage among adults declining slowly; demand strong in 18-24 segment
Coke and Pepsi remain dominant but Dr Pepper Snapple Group posted impressive growth
More than one in three (38%) report drinking less soda than last year
Three in ten drinking less because of recession; proposed soda tax could drive down sales
Many concerned about sugar content and prefer natural sweeteners
Refreshment, taste and pairing with foods powerful usage drivers
Incidence of use down among teens but amount consumed by day by users rose 2007-2009
Kid usage declining but still high demand segment
Incidence of use on the decline in all major race and ethnicity segments
Market Size and Forecast
Key points
Sales growth decelerated in recession due to price promotions and wellness trend
Figure 1: U.S. sales and forecast of carbonated beverages, at current prices, 2005-15
Figure 2: U.S. sales and forecast of carbonated beverages, at inflation-adjusted prices, 2005-15
Competitive Context
Key points
Growing popularity of carbonated juices poses competition for soda
Figure 3: Health perception of carbonated juice/juice drinks vs soda, by age, October/November 2009
Energy drinks provide fizz as well as energy boost
Walmart price cuts could create “discount mentality” that serves to drive down overall sales
Segment Performance
Key point
Seltzer outperforms regular and diet soda as many seek healthier options
Figure 4: FDMx sales and forecast of carbonated beverages, by segment, 2005-10
Figure 5: FDMx sales of carbonated soft drinks, segmented by type, 2008 and 2010
Segment Performance—Regular Carbonated Drinks
Key points
Low prices drive demand during recession
Figure 6: FDMx sales and forecast of regular carbonated drinks, at current prices, 2005-15
Segment Performance—Diet Carbonated Drinks
Key point
Sales of diet drinks follow trajectory similar to regular carbonated drinks
Figure 7: FDMx sales and forecast of diet carbonated drinks, at current prices, 2005-15
Segment Performance—Seltzer/Tonic Water/Club Soda
Key point
Seltzer/Tonic Water/Club Soda well positioned to capitalize on health and wellness trend
Figure 8: FDMx sales and forecast of seltzer/tonic water/club soda, at current prices, 2005-15
Retail Channels
Key points
FDMx and convenience stores
Mass outperforms other channels during economic downturn
Figure 9: Total U.S. sales of carbonated soft drinks, by retail channel, 2008 and 2010
Supermarkets perform relatively well due to frequent visits and value pricing
Figure 10: Supermarket sales of carbonated beverages, 2005-10
Convenience stores show declines due to price perceptions
Figure 11: U.S. sales of carbonated soft drinks at convenience stores, 2005-10
Mass merchandiser sales
Figure 12: U.S. sales of carbonated soft drinks at mass channel, 2005-10
Drug and other channel continues to produce modest gains
Figure 13: U.S. sales of carbonated soft drinks at other* channels, 2005-10
Natural channel
Natural channel overview
Sales of carbonated beverages in the natural channel
Figure 14: Natural supermarket sales of carbonated beverages, at current prices, 2008-10
Figure 15: Natural supermarket sales of carbonated beverages, at inflation-adjusted prices, 2008-10
Natural channel sales by segment
Figure 16: Natural supermarket sales of carbonated beverages, by segment, April 2008 and April 2010
Leading brands
Hansen’s Blue Sky Number One Brand
Reed’s also on Top
Organic soda sales shrink even smaller
Market Drivers
Key points
Incidence of health concerns hits plateau in 2009, as sales increase
Figure 17: Incidence of presently watching/controlling diet, May 2004-June 2009
Figure 18: Percentage of population aged 20 and over who are overweight or obese or extremely obese, 1988-2008
Childhood obesity reaches an all-time high
Figure 19: Prevalence of obesity among children and adolescents, 2-19 years of age, 1976-2008
Concerns about fat and weight often shape purchase decision-making
Figure 20: Reasons for watching/controlling diet, 2006 and 2009
Figure 21: Attributes diet-watchers look for in food, 2006 and 2009
Incidence of and concern about obesity higher among boomers
Figure 22: Prevalence of obesity and overweight among adults aged 20 years or older, by gender and age, 1999-2008
Figure 23: U.S. population, by age, 2005-15
High unemployment and underemployment drives many to seek less expensive options
Figure 24: U.S. unemployment and underemployment rate, January 2007-March 2010
Historically low levels of confidence discourage many from spending
Figure 25: Consumer Sentiment Index, January 2007-March 2010
Leading Companies
Key point
Dr Pepper Snapple Group achieves impressive growth with innovation and PepsiCo partnership
Figure 26: FDMx sales of carbonated beverages for leading companies in the U.S., 2009-10
Brand Share—Regular Carbonated Drinks
Key point
Pepsi realizes some growth with Mountain Dew
Figure 27: FDMx brand sales of regular carbonated drinks in the U.S., part 1, 2009-10
Crush shows phenomenal growth as a result of partnership and high appeal with strong demand segments
Figure 28: FDMx brand sales of regular carbonated drinks in the U.S., part 2, 2009- 2010
Brand Share—Diet Carbonated Drinks
Key points
Coke Zero and Diet Mountain Dew reveal effective growth strategies in diet
Figure 29: FDMx brand sales of diet carbonated drinks in the U.S., part 1, 2009-10
Brand Share—Seltzer/Tonic Water/Club Soda
Key points
Polar and private label are driving growth in FDMx sales
Figure 30: FDMx brand sales of seltzer/tonic water/club soda in the U.S., 2009 and 2010
Brand Qualities
Mountain Dew builds brand community through consumer participation
Coke Zero
Innovation and Innovators
Key points
Pace of new product introductions picks up in 2010
Figure 31: Number of new carbonated soft drinks product introductions in U.S., 2004-10
Top claims in new carbonated drinks
Figure 32: Top claims in new carbonated soft drinks products in U.S., 2005-10
Top flavors in new carbonated drinks
Figure 33: Top flavors in new carbonated soft drinks products in U.S., 2005-10
Trend toward juice mixed carbonated drinks
Functional soda
Relaxation claims on the rise
Stevia and Agave appear in carbonated soda
All-natural and organic ingredients
Use of superfruit flavors—pomegranate, açaí...
Natural cane sugar soda on the rise
Limited edition soda
Packaging innovation include downsizing the can and green packaging
Marketing Strategies
Overview
Television ads
Some companies emphasizing BFY options
Figure 34: Cherry 7 Up Antioxidant TV ad, 2009
Figure 35: Coke Minis, Pop poured into glass, TV ad, 2010
Coke Zero uses masculine creative to pitch diet product, without alienating women
Figure 36: Coke Zero (Coca-Cola Zero) clones, TV ad, 2010
Use of television ads to engage consumers in online communities
Figure 37: Mountain dew, DEWmocracy awaits your vote, TV ad, 2010
Figure 38: Pepsi Refresh project: People have ideas, TV ad, 2010
Social media efforts become more sophisticated
Dr. Pepper
MySpace
Facebook
Twitter
YouTube.com
Coca-Cola
Facebook
Twitter
MySpace
YouTube
Pepsi
Facebook
YouTube
Twitter
7UP
Facebook
Sprite
Facebook
Schweppes
Facebook
Twitter
Carbonated Drinks Usage, Type and Frequency
Key points
Regular soda usage slowly declining as more turn to BFY alternatives
Figure 39: Trends in the incidence of personal consumption of carbonated drinks, January 2005-December 2009
Incidence of use on the decline among men
Figure 40: Trends in individual consumption of soda, by gender, January 2005-December 2009
Incidence of use declining slowly among young adults
Figure 41: Trends in individual consumption of soda, by age group 18-34, January 2005-December 2009
Incidence of diet usage on the decline among the middle-aged
Figure 42: Trends in individual consumption of soda, by age group 35-54, January 2005-December 2009
Use of regular soda among the fast-growing 55+ segment on the decline
Figure 43: Trends in individual consumption of soda, by age group 55-65+, January 2005-December 2009
Drinkers consuming less per week
Figure 44: Trends in the mean consumption of carbonated drinks, January 2005-December 2009
Young adults still heavily over-index while affluents under-index
Figure 45: Mean consumption of soda, type of soda, by gender, age, household income, and households with children, November 2008-December 2009
Brand Usage
Key points
Incidence of cola brand use continue to be flat
Figure 46: Trends in the incidence of using top regular cola brands (in 2009) among adults, January 2005-December 2009
Incidence of using non-cola beverages drives sales growth in regular soda category
Figure 47: Trends in the incidence of using top regular non-cola brands (in 2009) among adults, January 2005-December 2009
Coke Zero shows that diet brands need to be reinvigorated in order to grow
Figure 48: Trends in the incidence of using top diet/sugar free cola brands among adults, January 2005-December 2009
Figure 49: Trends in the incidence of using top diet/sugar free non-cola brands (in 2009) among adults, January 2005-December 2009
Changes in Usage of Soda During The Past Year
Key points
Young adults much more likely to report increase in usage
Figure 50: Incidence of drinking more or less regular soda compared to a year ago, by age, April 2010
Households with children much more likely to report increased usage
Figure 51: Incidence of drinking more or less regular soda compared to a year ago, by presence of children, April 2010
Weight and High-Fructose Corn Syrup (HFCS) primary reasons for avoiding regular soda
Figure 52: Reasons for drinking less regular soda than a year ago, by gender, April 2010
Men more likely to report an increase in diet usage
Figure 53: Incidence of drinking more or less diet soda compared to a year ago, by gender, April 2010
Reasons for drinking less diet soda, compared to a year ago
Figure 54: Reasons for drinking less diet soda than a year ago, by gender, April 2010
Carbonated Soft Drinks: Attitudes and Motivations
Key points
Most people have heard of soda tax and say they will drink less if cost rises
Figure 55: Economy and tax-related attitudes towards carbonated soft drinks, by gender, April 2010
Most think soda is unhealthy; users tend to be brand loyal
Figure 56: Health, brand, flavor, and diet soda marketing-related attitudes towards carbonated soft drinks, by gender, April 2010
Figure 57: Health, brand, flavor, and diet soda marketing-related attitudes towards carbonated soft drinks, by gender, April 2010
Packing and feminine image discourage use among a small number of men
Figure 58: Men’s attitudes towards diet carbonated soft drinks, April 2010
Figure 59: Men’s attitudes towards diet carbonated soft drinks, by age, April 2010
Young adults more likely to think soda tax can be good and less likely to pay the premium
Figure 60: Economy and tax-related attitudes towards carbonated soft drinks, by age, April 2010
Attitudes Toward Soda Sweeteners
Key points
Many concerned about sugar content and prefer natural sweeteners
Figure 61: Attitudes towards sweeteners in soda, by gender, April 2010
Young adults tend to be somewhat less knowledgeable about sweeteners and more likely to avoid artificial low cal sweeteners
Figure 62: Attitudes towards sweeteners in soda, by age, April 2010
Why Soda Drinkers Drink Soda
Key points
Refreshment, taste and pairings key usage drivers
Figure 63: Why soda drinkers drink soda, by gender, April 2010
Young adults more likely to report impact of advertising and habit
Figure 64: Why soda drinkers drink soda, by age, April 2010
The Teen Soda Consumer
Key points
Incidence of teen use on the decline but users consume more than adults per day
Figure 65: Trends in the incidence of teen personal consumption of carbonated drinks, January 2005-December 2009
Figure 66: Mean consumption of soda, by type of soda drunk by teens, January 2005-December 2009
Coca-Cola and Pepsi remain favorites among teens
Figure 67: Trends in the incidence of using top regular cola brands among teens, January 2005-December 2009
Figure 68: Trends in the incidence of using top regular non-cola (in 2009) brands among teens, January 2005-December 2009
Coke Zero resonates with teens
Figure 69: Trends in the incidence of using top diet/sugar free cola brands among teens, January 2005-December 2009
Figure 70: Trends in the incidence of using top diet/sugar free non-cola brands (in 2009) among teens, January 2005-December 2009
The Kid Soda Consumer
Key points
Kid use remains high but reflects gradual decline observed among adults and teens
Figure 71: Trends in the incidence of personal consumption of carbonated drinks among kids, January 2005-December 2009
Figure 72: Trends in the mean frequency of drinking carbonated drinks among kids, January 2005-December 2009
Preference for cherry-infused cola on the rise
Figure 73: Brands of regular cola liked best by kids, January 2005-December 2009
Parents becoming more hesitant to purchase kids’ favorite cola
Figure 74: How often kids’ favorite colas are in the house, January 2005-December 2009
Kids contribute to spike in Crush sales
Figure 75: Trends in the other soft drinks preferred by kids, by top brands (in 2009), January 2005-December 2009
Favorite non-cola also less frequently available in household
Figure 76: How of often kids’ favorite other soft drinks are in the house, January 2005-December 2009
Impact of Race/Hispanic Origin
Key points
Declines seen in all major race segments; Asians significantly less likely to use
Figure 77: Trends in individual consumption of soda, by race/Hispanic origin, January 2005-December 2009
Figure 78: Mean consumption of soda, by type of soda, by race/Hispanic origin, November 2008-December 2009
Asians most likely to report increased usage of regular soda
Figure 79: Incidence of drinking more or less regular soda compared to a year ago, by race/Hispanic origin, April 2010
Hispanics most likely to report drinking less regular soda due to weight concerns while many blacks reduce consumption on doctor’s orders
Figure 80: Reasons for drinking less regular soda than a year ago, by race/Hispanic origin, April 2010
Blacks and Hispanics most likely to report increase in diet soda use
Figure 81: Incidence of drinking more or less diet soda compared to a year ago, by race/Hispanic origin, April 2010
Appendix– Additional Race and Hispanic Origin Tables
Proposed tax and recession
Figure 103: Economy and tax-related attitudes towards carbonated soft drinks, by race/Hispanic origin, April 2010
Health, brand, soda flavor, and diet soda marketing
Figure 104: Health, brand, flavor, and diet soda marketing-related attitudes towards carbonated soft drinks, by race/Hispanic origin, April 2010
Men and diet soda
Figure 105: Men’s attitudes towards diet carbonated soft drinks, by race/Hispanic origin, April 2010
Attitude toward soda sweeteners
Figure 106: Attitudes towards sweeteners in soda, by race/Hispanic origin, April 2010
Why soda drinkers drink soda
Figure 107: Why soda drinkers drink soda, by race/Hispanic origin, April 2010
Appendix – Trade Associations

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By market: United States (in North America)