Drop in Soda Sales Accelerates as Healthier Options Grow

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Soda sales have been declining for the past seven years, but the pace of the decline quickened in 2011 despite growth in the overall beverage market.

Americans continue to guzzle more bottled water, ready-to-drink tea and coffee, sports drinks and energy drinks, rather than sip on soda and fruit juices, according to beverage statistics released Tuesday.

The U.S. beverage market grew by 0.9 percent in 2011, according to preliminary data from Beverage Marketing, a research, consulting, and financial-services firm that tracks the beverage industry. Although this marked the second year of growth for the beverage industry, after two consecutive declines in 2008 and 2009, the pace of growth slowed from2010.

Beverage Marketing said sales were hurt by higher prices, which made the drinks more difficult for struggling lower-income consumers to afford.

Beverage Digest, an industry newsletter that also issued industry sales data Tuesday, estimates carbonated soft drink prices were up about 3 percent last year, as companies passed on the higher cost of sweeteners, such as corn syrup and other raw materials, to consumers.

All of the big three beverage companies — Coca-Cola, PepsiCo , and Dr Pepper Snapple— sold lower volumes in the U.S., as sales of leading brands such as Coke, Diet Coke, Pepsi-Cola, and Mt. Dew fell, according to Beverage Digest.

Both Coke and Pepsi saw their market shares shrink, while Dr Pepper’s share was flat, the newsletter said. Sales of Dr Pepper’s flagship brand rose 0.5 percent last year, a good showing, but not nearly as good as Fanta, the ninth largest soda brand, which saw sales volume climb 3 percent. Fanta’s growth was enough to unseat Diet Dr Pepper from the top 10.

Leading Beverage Trademarks

2011 Rank
% Change
Coke Coca-Cola 1 (1.5%)
Pepsi PepsiCo 2 (5.5%)
Mountain Dew PepsiCo 3 (1.0%)
Dr Pepper Dr Pepper Seven Up 4 0.3%
Gatorade PepsiCo 5 8.1%
Sprite Coca-Cola 6 (0.6%)
Nestle Pure Life Nestle 7 (0.2%)
Poland Spring Nestle 8 (1.8%)
Tropicana PepsiCo 9 (5.2%)
Dasani Coca-Cola 10 7.5%
Source: Beverage Marketing. Figures in parenthesis are losses. Trademark volume includes all beverages under that trademark. For example, Coca-Cola, including Diet Coke, Caffeine-Free Coca-Cola, etc. Gatorade includes G2.

While Fanta’s growth was impressive, the fastest-growing beverage brand was Dasani, a bottled water sold by Coca-Cola. Dasani’s volume rose 11 percent, according to Beverage Digest. It was followed by Arizona iced tea, which grew 9.3 percent, and Pepsi’s Gatorade, which rose 8 percent.

To put this in perspective, carbonated soft drink sales grew about 3 percent annually in the U.S. for much of the ’90s. The category has been declining since 2005, however, as increasingly health-conscious consumers turn to other beverages perceived to be more healthful.

In the carbonated soft drink category, six of the top 10 brands lost volume, and only four grew. Overall, sales of carbonated soft drinks fell 1 percent in 2011, faster than the 0.5 percent decline in 2010, Beverage Digest said.

Beverage Digest includes fast-growing energy drinks within the category. Without energy drinks, sales of carbonated soft drinks would have fallen 1.5 percent.

Beverage Marketing estimates energy drink sales grew 14.4 percent by volume in 2011. This means it was the fastest-growing segment with the beverage industry. But it remains a relatively small share of the total beverage industry volume. In fact, only the read-to-drink coffee category is smaller, Beverage Marketing said.

Not surprisingly, no energy drink or ready-to-drink coffee brand ranks among the leading trademarks.

Sports drinks are another matter. Gatorade has been growing at a fast clip and topped the one-billion-gallon mark for the first time last year. Gatorade, coupled with G2 and other brand variations, is the fifth-largest beverage trademark, according to Beverage Marketing.

As for bottled water, its growth continues to accelerate. In 2008 and 2009, tough economic times led to a decline in bottled water sales, but the category recovered in 2010, and its growth rate accelerated in 2011. Bottled water sales volume was up 4.1 percent in 2011, faster than the 3.5 percent growth in 2010.

“The strong showing by high-end and functional products shows that consumers — at least the more affluent ones — are not concerned exclusively with economic consideration when making their beverage selections,” said Michael C. Bellas, chairman and CEO of Beverage Marketing.

Questions? Comments? Email us at consumernation@cnbc.com. Follow Christina Cheddar Berk on Twitter @ccheddarberk.