The industry group, the American Beverage Association, disputed the findings, saying in a statement that the study is "observational" and "cannot establish causation. In fact the lead author of this research acknowledges this fact in a news release promoting his findings where he states, 'We can't say that diet drinks cause these problems.'"
While the study is up for debate, the consumer attitude toward diet is crystal clear; they're falling out of love. Beyond health concerns, consumers are choosing healthier and more all-natural options, and millennial consumers are increasingly opting for energy drinks.
The latest Nielsen data showed dollar sales for diet drinks in the four weeks to March 15 plunged 7.3 percent. Regular soda actually showed growth in the same period, but not nearly the strong numbers seen in energy drinks (up 8.3 percent) or sparkling water (up 26.2 percent).
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The industry has recognized the shift in consumer habits. Indra Nooyi, CEO of PepsiCo, said during the company's third-quarter earnings call last year that people are increasingly demanding natural sweeteners instead of artificial sweeteners, calling it "a fundamental shift."
Coca-Cola CEO Muhtar Kent blamed the dip in overall carbonated beverage sales last quarter largely to "softer Diet Coke volumes."
As the industry, yet again, finds itself trying to adapt to the fast-changing consumer habits, there's a new wave of beverage innovation underway—one in which manufacturers are searching for new ingredients and formulas to sweeten drinks and appeal to today's consumer.
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Bonnie Herzog, a beverage industry analyst at Wells Fargo, said Coca-Cola is in the strongest position for navigating the slump in diet drinks, even though it has the most to lose. Coke has the highest percentage of its carbonated soft drinks portfolio volume in diet drinks; however Herzog said the strength of its regular soda drinks and huge international footprint should help offset the diet slowdown.
Herzog and other analysts predict 2014 will be a year of innovation for the industry. In Argentina, Coke has already launched Coke Life, which uses stevia as the primary sweetener, and may expand sales to other markets soon. PepsiCo is selling Pepsi Next with stevia in Australia and France, and industry watchers expect it to come to the U.S. Both companies have spoken optimistically about early indications and sales of the new drinks in their test markets.
So while the decline in diet drinks is a headwind for the major beverage companies in an already challenging time for soda sales, it could ultimately have a silver lining. That is, if companies can quickly adapt, innovate and launch exciting new products that entice the modern consumer.