What are you going to drink?

Traditional soft drinks are continuing their decline. McDonald's introduced Sweet Tea when there was a foot of snow on the ground in January this year. Recent commercials on TV have been attacking the extra calories that are added in some "energy drink waters".

Here's the latest news from the bottlers:

Soft-Drink Sales Volume Slipped Faster Last Year

A decline in U.S. soft-drink sales volume accelerated sharply last year, as Coca-Cola Co., PepsiCo Inc. and other beverage companies failed to overcome flagging consumer interest in big soda brands and grappled with rising commodity costs that pushed the prices of those drinks higher.

Beverage Digest, an industry publication and data service that tracks soft-drink sales in supermarkets and other retail outlets, vending machines and restaurants. The decline was considerably worse than 0.6 percent and 0.2 percent slips in 2006 and 2005, respectively, and erased gains in soda sales made since 2000.

The accelerated drop appeared to be due to price increases of about 5 percent in the past year that have made soft drinks less attractive, coupled with continually growing consumer interest in newer drink categories like enhanced waters and teas, said John Sicher, editor and publisher of Beverage Digest. While Coke and Pepsi market those drinks, too, they make up a smaller percentage of overall volume than carbonated soft drinks.

"These companies have to redouble their efforts to find new beverages and new ways to replace the lost soda volume," Mr. Sicher said.

The carbonated soft-drink volume results would have been "at least several tenths of a percentage point worse" had they not included sales of energy drinks, Mr. Sicher noted. While energy-drink sales pale in size to sales of big soft-drink brands like Coca-Cola and Pepsi, they represent one of the fastest-growing beverage segments.

The retail value of the U.S. carbonated soft-drink industry rose 2.7 percent to $72 billion, reflecting both the price increases on soft drinks and the growth of energy drinks, which are premium-priced. U.S. annual per capita consumption of soft drinks remains the highest in the world, at 789 eight-ounce servings last year, down from 849 eight-ounce servings in 2000.

Coca-Cola and PepsiCo's soft-drink volumes fell 2.7 percent each, and each company's share of the U.S. carbonated soft-drink market slipped 0.1 percentage point -- to 42.8 percent for Coke, the U.S.'s largest seller of soft drinks, and 31.1 percent for second-largest Pepsi. The third-largest soft-drink maker, Cadbury Schweppes PLC, also saw its sales volume drop, but its market share rose 0.1 percentage point to 15 percent. Volume for Cott Corp., the fourth-largest beverage maker, which produces private-label beverages for Wal-Mart Stores Inc. and other retailers, fell 8.5 percent and its market share slipped 0.3 percentage point.

Among the top 10 selling soda brands, only Diet Mountain Dew, marketed by PepsiCo, and Diet Dr Pepper, marketed by Cadbury, posted volume growth. The top two brands, Coca-Cola Classic and Pepsi-Cola, continued to slide, with Coke volume slipping 3 percent and Pepsi volume falling 4.8 percent. Some smaller brands posted healthy growth: volume of Coca-Cola Zero, a diet cola, rose 37.5 percent.

Dan Schafer, a Coke spokesman, said the company is making headway on accelerating carbonated soft-drink sales.

"Our sparkling-beverage category showed sequential improvement during the year," he said. "We're confident we've got the right strategies."

Dave DeCecco, a spokesman for PepsiCo, which dominates noncarbonated-drink sales, said the company is continuing to expand its overall beverage portfolio.

"In 2007 we outperformed our nearest competitor, and we expect to gain share in 2008," he said.

The slipping soda sales and a slowdown in volume growth of bottled water mean that overall beverage sales slowed for the major companies, Beverage Digest said. Coke's combined carbonated and noncarbonated drink volume slipped 0.5 percent, while PepsiCo's overall volume rose 0.1 percent, thanks largely to strong growth of its Lipton tea brand.

The U.S. market for nonalcoholic beverages -- including soda, bottled water, sports drinks, fruit drinks, energy drinks and other drinks -- rose just 1.3 percent, according to Beverage Marketing Corp., an industry consulting firm.

(Source: The Wall Street Journal, 03/13/08)

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