Press Clips: Another Rough Year for CSDs

Dust off the dial-up modems and the Clinton infidelity jokes — we’re back in the 90s.

At least, that’s the takeaway from Beverage Digest’s (BD) latest newsletter, which summarizes the beverage industry’s tough 2013, including CSD volume dropping to 8.9 billion 192 oz. cases (compared to 10.1 billion in 2003).

“Total U.S. CSD volume is now back to where it was in 1995,” BD writes.

CSD volume has declined for nine consecutive years, and the 3 percent decline in 2013 was worse than the 1.2 percent decline in 2012 and the 1 percent decline in 2011. BD figures show that while Coke added to its 42.4 percent market share in the CSD industry, volume declined by 2.2 percent. PepsiCo holds 27.7 percent market share, but saw volume decline by 4.4 percent. Dr Pepper Snapple’s market share is 16.9 percent, but volume declined by 9 percent.

At BevNET Live in December, we explored this idea at length — we’re going to direct you now to a presentation and panel on the $7 billion opportunity that the ongoing decline of CSDs affords entrepreneurs. So, take a half hour and watch Neil Kimberley’s presentation and the fascinating panel that follows.

Now, back to our regularly scheduled programming.

There are plenty of previous reports indicating that diet CSDs are also bearing the brunt of the healthy food and beverage movement. BD’s all-channel data states that Coke easily out-performed Diet Coke, Pepsi bested Diet Pepsi, Mt. Dew topped its diet counterpart and the same can be said for Dr Pepper and Diet Dr Pepper.

“Diet CSDs are now struggling,” BD writes. “At least some consumers seem to be shying away from the legacy diet sweeteners, according to sources.”

Despite the underwhelming report from BD, Dana LaMendola of EuroMonitor writes that U.S. consumers still have an appetite for sweet, fizzy drinks. She argues that CSD sales are suffering from a negative perception more than anything else. Energy drinks and enhanced bottled waters are growing even with their sugar and sweetener contents. It’s all a matter of positioning, she writes.

“This shift reveals that while the perception of soda is growing increasingly negative, U.S. consumer demand for flavoured, fizzy beverages persists,” LaMendola writes.

Between 2008 and 2013, energy drinks increased by 61 percent in retail volume and 55 percent in retail value. The energy drink industry has reached $9 billion in sales, she writes.  LaMendola also points to the growth of Sparkling ICE. In a recent interview, Zevia CEO Paddy Spence said that it’s only a matter of time until consumers compare Sparkling ICE to diet CSDs. But that time hasn’t happened yet. In 2013, Sparkling ICE reached $435 million in sales via increases of 90 percent in volume and 86 percent in retail value.

“This is great news for U.S. beverage companies,” she writes, “as it means the decline of carbonates is much more about branding and perception than it is about any real shift in behavior.”

Other great news for the beverage industry: Kobe Bryant is in. Last week, the black garden snake announced his investment in BodyArmor. But is Bryant’s presence and capital enough to help the brand trump Gatorade and Powerade? Danny Chau of Grantland doesn’t think so.

While nearly indistinguishable, Kobe is on the left, Grantland’s Danny Chau is on the right.

While Chau’s investment analysis only scratches the surface, the article provides BodyArmor with a forthright case study of a target consumer — a millennial who drinks Gatorade with sports and meals. After hearing about Kobe’s investment, Chau darted to a liquor store (of all places) and “bought as many bottles as I could hold.” He designed the article in a meta-question-and-answer format and his first question was about the brand name.

“Why is this drink called BodyArmor? Great question. It’s a terrible name and I have no idea,” he writes. “Wow, this is off to a fantastic start.”

Chau explained his testing variables. Along with aroma, he studied taste at both refrigerated and room temperatures after physical activity and as a meal accompaniment. He rates each beverage on a scale of 0 to 50 and offers some vivid taste assessments. For him, Mixed Berry comes out on top. But it’s his macro insights that pull the piece together.

For example, he doubts BodyArmor’s ability to challenge Gatorade, a company that made America’s youth believe Glacier Freeze would improve their mile time.

“There is nothing natural about Riptide Rush, a Frost flavor that shares the same color as the Swiffer WetJet cleaning solution,” he writes, “but it’s a successful product because of unparalleled name-brand recognition (and because it tastes fantastic).”