Although carbonates remain the backbone of the country's beverage industry, consumption of packaged water in the US accounted for an astonishing 80% of soft drink growth in the US, according to a report from beverage industry analysts Canadean.

Consumption of packaged water grew by 18% in 2002 compared with an increase of 3% for the total soft drinks market.

Around 48% of the US now falls under the classification of moderate to extreme drought conditions. In this environment, soft drinks have prospered with their share of all commercial beverages increasing from 51% to 58% over the last decade.

Packaged water is relatively inexpensive to produce and package, offering the potential for high profits. As such, the sector has attracted significant investment from the major companies. Non-mineral, still water in single-serve packs has been the main contributor of the rapid growth, increasing by 20% in 2002 alone and accounting for just under 95% of the sector's total consumption. Although strong growth among the leading players has led to increased consolidation, Packaged Water remains a highly fragmented market with less than 45% of total sales attributable to the major brands.

The leading soft drink sector, carbonates, is over three times larger than packaged water and a far more mature market. The introduction of a multitude of new flavours helped consumption of carbonates to increase slightly. Cola is the leading sub-sector, enjoying a near 60% share. Following a steady decline over recent years, Cola performed well in 2002, boosted by the success of new variants such as vanilla and lemon. The second largest sub-sector, lemon and lime, had contrasting fortunes with a 3% decline. Meanwhile, the dominance of regular carbonated drinks continues to be eroded by their low calorie counterparts.

Third placed juices and nectars saw extremely fierce price competition from the major suppliers. Orange is the most popular flavour but appears to be in a steady decline, whilst apple and tomato have both increased. The explosive growth in cocktail/mixed fruit flavours since 1999 has now slowed with only a modest improvement taking place in 2002.

On the packaging front, PET strengthened its position as the leading material. Consumption of drinks in PET containers increased by 9% in 2002 with similar growth expected in 2003. The only other serious contender, cans, increased slightly but are still losing ground to PET.

Despite a stuttering economy and the ever present threat of further terrorist attacks, consumer spending in the US has remained buoyant. Coupled with a high number of new product innovations, Canadean expect this to help support further growth in soft drinks consumption and predict an increase of around 3% in 2003.