The First Drop: Two Views of Time, According to Soda

The two big brands in the gut health soda space, Poppi and Olipop, have clearly found market traction – even to the point where Pepsi famously paid out nearly $2 billion for Poppi last year.

The two brands have also inspired something of a gut pop insurgency. There’s even a Pepsi Prebiotic Cola out there now, which surely led to some awkward silences at HQ when Poppi leadership dropped by for planning meetings. There is, of course, a chase pack for the big two, one led by longtime beverage guy Tom First and his Culture Pop, as well as rising brands like Cove Soda and Bloom Pop.

But what does the rise of the gut pop say about the future of soda? Has this variant, the low-sugar, mildly beneficial, technicolor child of Fanta and kombucha really re-energized the category?

There are a different ways of looking at that question. One is that the gut pop breakthrough is part of a long arc of alternative CSDs breaking through into the soda space, one that will continue as long as there’s positive innovation.

There are lots of founders who are hoping that’s the case, that a “modern soda” set will come to include an array of not protein-infused CSDs – lots of brands are swerving that way right now – as well as other potential variants that all fall under the aegis of soda and revitalize the category.

CSDs have been losing share to other beverage categories for about 25 years; a few years ago, the soda category uncrossed the Rubicon of total dominance, when it dropped under half of the “share of stomach” of all purchased beverages; that decline has only accelerated, and that means that the rise of the modern soda set, if successful, is only going to help keep the category from losing more of the roughly $45 billion piece of the more than $100 billion total non-alcoholic beverage market that it occupied this year, according to Nielsen IQ.

But the reason that functional brands want to use soda as their beverage medium is because, even as it falls, it’s still the gateway category to the biggest group of customers. Even as soda declines, however, it’s clear that gut sodas are part of a much longer historical arc, one in which the core CSD category, once the sugary beverage version of the supercontinent Pangea, has fractured into a larger set of linked geographies.

Diet CSDs were the first new continent in that view, now encompassing about $15 billion of that $45 billion in the overall CSD space.

The next big breakthrough? In this picture, that’s the energy drink, which serves that pick-me-up function that was the provenance of the CSD going all the way back to the mythical pharmaceutical origins of Coca-Cola.

Red Bull, Monster, Celsius and the like now make up $22 billion in a category that basically out-sodas soda. It’s been approximately 30 years since energy drinks started to really take root in U.S. soil, and the argument I’d make is that on a generational basis they have displaced sodas more than any other beverage format. For years, Wall Street firms and Senate offices stocked Diet Dr Pepper for overworked young staffers; now those office refrigerators are filled with Celsius.

Compared to diets and energy drinks, the shift to CSD replacement by sparkling waters represents a slightly smaller, relatively recent boom, albeit one that is drawing in new brands and continuing to grow.

While seltzers and sparkling tonics have histories that predate even the big soda brands, sparkling waters as we know them fit under the broad idea that bubbles are entertaining, one of the major connotations of the soda category. That fun factor has been filtered through consumer health movements by brands like La Croix. Sparkling Ice, Polar, Spindrift, Waterloo and Liquid Death, which each offer crisp refreshment in fun – sometimes sweet – flavors that have, of late, even started to include colas. Because of the category’s long history it’s clear that not all of the $6 billion category comes from consumers who are fleeing CSDs, but that’s what has accounted for the decade-plus boom years it’s enjoyed of late.

Now, 15 years after the world fell for “La Cwah”, and just a year or two after the kombucha wave plateaued, gut sodas have had their breakthrough. Between the two of them, Olipop and Poppi totaled about $1 billion-plus in retail sales last year, and stores are quickly redrawing plan-o-grams to showcase these hot brands and their chase pack.

Even so, I’m still not convinced they are the fully repeatable breakaway category for the long term. For one, the ads I’ve seen from Pepsi around its new acquisition haven’t leaned into functionality thus far, instead pitching Poppi as a new, friendly face of soda. That’s the direction Poppi itself had to lean to get the deal done with Pepsi, but having just another soda, even if it’s a permissible one, doesn’t necessarily bode well for a sub-category that has to be managed by the Pepsi system. It kind of depends on Olipop and at least one other prebiotic competitor continuing to grow to justify the type of specialized merchandising that the category demands, or else Poppi risks becoming just another Crush or Starry on the blue system trucks.

Here’s the other possibility, however – one that might not be the best for Olipop (although it still has a fine chance for success). That’s Modern Soda evolving not just as a Walmart merch play of a few gut pops with Zevia thrown in, but a broader functional soda set that pulls in a couple of hotter brands as well. Right now there are a couple of functions gaining speed: the nascent relaxation set has sparklers Trip and Recess showing strong brand vision (although taste remains an issue: until they go sweet enough, both brands are trimming away fans of sparkling water fans rather than cutting a swath through the soda camp). If other “brain health” brands are able to build a bridge toward calm there might be enough of a commotion to get the big box stores to play along.

What else might make it through? Sodas with protein are currently surging, but they feel more like a play to gain acceptance in a world where GLP-1s require their consumers to “make every calorie count”, rather than a broadly appealing drink that can be chugged on repeat, as most other products are under this umbrella. I could (easily!) be wrong, as the ability of these clear proteins to become almost enjoyable in carbonated states seems to be continually improving, but protein sodas are also facing so much competition from protein chips, shakes, popcorn, ice cream, and everything else in the world that they may just fit that niche.

The next bubbly breakthrough after that is anyone’s guess, but I would warn founders to recognize that even strategic exits like those for Poppi – and Bai and Body Armor and Kevita before them – are rarely the end of the story; as these brands enter bigger systems, they also become line items in a marketing budget. Especially for those trying to break new category ground, it’s sometimes easier to make your proposition clear when you’re dealing with customers and consumers than the internal gears of the big machine.

To understand how time moves at that scale, think about another movement we’re seeing right now, as younger consumers move toward products like Coke Zero and Pepsi Zero and away from their Diet Coke/Diet Pepsi counterparts simply because they don’t like the idea of “Diet” in a body-positive era. It’s more a cultural shift than a new continent, yet it’s one that’s taken place after the zero brands had nearly 20 years on the market.

In 20 more, what’s most likely? That the soda consumer shift will be to a Recess, or a Poppi, or a Waay, or just a Pepsi Probiotic? The answer can’t come soon enough, but for most of us, it’s a long way off.