The End of Colas?

June 08, 2010

While France may have given the world champagne, America returned the favor with its own bubbly beverage - cola.

While France may have given the world champagne, America returned the favor with its own bubbly beverage - cola. The iconic beverage in America is cola. One of the few nations built on the thirst for this effervescent dark soft drink, other regions of the world are now reaching out for our bubbly passion. And while the global expansion continues to increase, it appears that U.S. consumers are pushing back the bottle, reaching instead for items with healthier ingredients and marketing messages.

The shift in beverage choices is fueled by the media buzz for soda taxes around the country. Governments large and small looking for ways to raise tax revenue are pitching taxes on soda and other sugary drinks as a solution that does the least harm and, perhaps, a bit of good in the battle against American obesity. A national soda tax has even been considered by the Senate Finance Committee as a way to help pay for President Obama’s health care overhaul.

While the national plan was not successful, some local tax plans have made the grade. Even in areas where taxes have not been approved, legislative efforts addressing the health of the nation’s children have also impacted consumer beverage choices. Ohio House lawmakers approved legislation last month, which pushes out the candy machines and soda pop in favor of low fat milk, fruit juices, water and healthier fare in Ohio's school lunchrooms by 2014. School districts across the country have already or are considering similar actions.

Stepping in to fill the void of colas are functional beverage choices of the future as well as new soft drink choices made with cane sugar and natural sweeteners. Consumer focus on authenticity and quality of ingredients will continue to drive adult consumers to trade up to more premium offerings in this sector. According to a recent article in Reuters, a Mintel analysis suggested in a recent press event that growing consumer awareness of health and wellness positioning is a market driver in the adult soft drink sector in both the U.S. and abroad.

“In some parts of Europe, particularly in Spain and Germany, we now quite commonly see products with antioxidant flashed on their labels as a way of quickly attracting the consumer to the fact that this is a health positioned adult juice drink,” said David Jago, Mintel’s director of innovation and global insight, noting that beverages positioned as additive-free, organic or natural are gaining momentum.

In an effort to keep its fans, Cola category leaders Coke and Pepsi are taking their marketing messages to the streets. Both are leveraging active social media campaigns to build up a bank of trust with their audiences Pepsi’s "Refresh Everything" campaign asks its "fans" to come up with ideas to "refresh the world" in the categories of health, the planet, art and culture, food and shelter, neighborhoods, and education. Fans submit descriptions of their ideas. Pepsi screens and posts them on the website. Visitors vote on them. Then, after considering the votes, Pepsi selects which ones to fund. Grants range from $5,000 to $250,000. Pepsi plans to spend a total of $15.6 million on the year-long program, which ends next January. Coke has the second most popular page on Facebook (after President Obama's) with more than five million fans.

Will the media campaigns and legislative moves to get Americans to kick their cola habits or will consumers continue to hydrate their loyal passion? As the next generation of U.S. consumers is raised through the ranks of soda-free schools and focused nutritional education, will cola become an American pastime?

Beverage companies themselves are beginning to plan for the future as sales in traditional categories decline. A recent Rabobank report, "Convergence in the Beverage Sector,” noted that beverage makers are looking to acquire companies outside their core product segments as a growth strategy.

In the mature U.S. and European markets, consumer health concerns, combined with greater interest in new products, continue to cause carbonated soft drink sales to lose share to bottled water, ready-to-drink teas and other noncarbonated beverages. In the U.S., carbonated soft drink’s share of non-alcoholic RTD beverages dropped from 85% in 1998 to 64% in 2008, while bottled water's share grew from four percent to 20%, and other noncarbonated beverages' share grew from 11% to 17%, according to the report.