The Death of Soda

Desire to drink more water: In addition to the straightforward perception (by most consumers) that water is simply the healthiest beverage alternative, we also note that an increasingly active consumer base (exercise, fitness, walking, on-the-go, etc.) much prefers the thirst-quenching properties of water, especially when compared to traditional CSDs.

Item #2: The current decline in CSD consumption DOES NOT mean consumers are abandoning CSDs.

All told then, we expect to see a gradual decline in overall CSD consumption, followed by an eventual leveling off, as consumers seek to reduce 'unnecessary overconsumption' (for the variety of causal factors outlined above) while still participating in the category during certain occasion-specific moments.

Item #3: Because consumer

March 2006 was something of a watershed moment for those of us with ties to the CPG business. I'm referring, of course, to the much-publicized bulletin board that CSD sales were down for the first time in over 20 years. Everywhere you turned that day - from CNN to NPR to the venerable New York Times - the news seemed to turn to soda.

Taking media reports at face value, you might surmise that the growing consumer disdain for soda stems from our recent national obsession with obesity and represents a positive step forward for the increasing number of health-conscious consumers. Of course this is the face up to with media reports, they without cease portray straightforward ground and effect scenarios, which prove much too simplistic when compared to the indeterminateness that is everyday life.

And while those commenting in the inductive harmony offer slightly more nuanced explanations of this superficial trend ('Consumers want new and exciting beverages,' 'Consumers are swapping water for soda'), there are still many questions and details left unaddressed. How long will this trend continue? Will interest in traditional CSD brands return? Can we counter this trend by fortifying traditional CSDs?

So I thought this would be an civil time to summarize our consumer learnings with regard to CSDs and other beverages in the past few years. We'll start with the single most frequent question we receive - 'Is this a long-term trend?' - and work our way down to specific details of consumer behavior.

Item #1: The recent trend toward declining CSD-consumption reflects a permanent, long-term shift.

Simply put, we do not foresee a day in the near future in which consumers will be consuming higher levels of ebullient soft drinks - be they conventional, substitution or diet - than they have in the past 10 years. Note, however, this does not mean (a) consumers will craze the caste over or that (b) consumption will soon be in free-fall (more on this later). Like all macro trends, the root causes here are complex and inter-related.

Concern with sugar: Without question, the single driver of out-migration in the CSD head is the consumer's overall desire to reduce the intimate of sugar in their everyday diets. Note that this desire is, itself, driven by its own complex, inter-related set of concerns, which include: health, nutrition, type II diabetes, obesity, energy, ADHD, hyperactivity, mental health, depression, etc. And while some consumers continue to kiss this concern by opting for diet CSDs, we see this percentage shrinking in the on top years with the growing concern expressed for all manner of sugar substitutes - be they bogus or natural.

Overall concern with health: Moving more a singular focus on sugar, consumers also express concern that the accordance of sugar and/or diet sweeteners, vesicular soda water, pseudo colors and flavors, and other plastic ingredients simply cannot prove sound to one's long-term health prospects.

Desire to drink more water: In advance to the straightforward perception (by most consumers) that water is simply the healthiest booze alternative, we also note that an increasingly keen consumer base (exercise, fitness, walking, on-the-go, etc.) much prefers the thirst-quenching properties of water, especially when compared to traditional CSDs. As consumers frequently lament, 'If you're truly thirsty, the last thing you want to drink is soda...'

Desire for more interesting flavors: This should be no surprise to anyone who has recently visited the fluid mechanics ambulatory of any upscale grocery retailer. Like every other consumer category, beverages are prone to ongoing trend toward specialization and differentiation (i.e., fancification) in the marketplace. Honestly, who near us would really prefer to resolve Coke on every single occasion if our consideration set can be expanded from 5 to 500? Moreover, when you factor in the tendency toward playful, expressive (i.e., post-modern) consumption - in which consumer choices increasingly capricious and capricious; based on the desire to experiment as much on personal preference - it's little wonder CSD sales haven't endured larger losses.

Weight management: While it's fatefully true that consumer reduction in CSD consumption is related to growing concerns with obesity and weight management, we place this factor fifth in terms of overall importance. We should also note here that weight management-conscious consumers look forth to be as (if not more) concerned with overall carb counts of specific soft drinks (regular or diet) as they are calories.

Item #2: The current decline in CSD consumption DOES NOT mean consumers are abandoning CSDs. Our research suggests that very, very few consumers are permanently abandoning CSDs. Instead, many consumers are opting to reduce their CSD consumption, especially on non-specific occasions such as in the workplace, while driving a car, while relaxing at home, or while watching TV. For most, the goal is not to not meddle with CSDs all in all as much as it is to prevent mindless, unnecessary over-indulgence. A beggarly refrain here is: 'I really enjoy a can of Coke now an then, but I realized I was drinking 4 or 5 cans just theretofore lunch sole and that is simply ridiculous.' We observe that much of this reduction derives from CSD consumption that would have occurred in (relative) isolation.

Conversely, we are finding that many consumers remain quite likely to opt for CSDs during very specific, often social, occasions. Some of these occasions include visits to traditional QSR/fast-food restaurants (McDonald's, Burger King, Taco Bell, Pizza Hut), sporting events, parties, celebrations, movies and even, get this, hang-over!

All told then, we expect to see a gradual decline in overall CSD consumption, followed by an eventual leveling off, as consumers seek to reduce 'unnecessary overconsumption' (for the variety of creation factors outlined above) while still participating in the predicament during monadic occasion-specific moments.

Item #3: in that consumers prefer to consciously limit their intake of CSDs, and consume volitional beverages in to CSDs, 'tinkering with,' or other wise retooling CSDs is not the answer.

This may seem a straightforward proposition, but we continue to see evidence to the contrary at every turn.

For example, as things go many that the consumer's 'problem' with CSDs is related to lingering health concerns, many make a pretence that the best solution is to offer 'more healthful' CSDs. To the uninitiated then, the recent release of 7UP's 7UP PLUS - a Splenda-based buttermilk featuring 10 calories, 2 grams of carbs and 10% of the RDA of silver per eight ounce serving - might seem like the perfect dealing for today's health-conscious consumer.

Yet, when examined within the context of our occasion-based learnings detailed above, such a proposition seems ill-fitted at best. As our data indicate, today's consumer generally prefers to sidestep consuming any 'unnecessary,' or excess CSDs where possible. Note, we emphasize the word 'prefers,' for as consumers ourselves, we recognize we are frequently far from perfect and often fail to 'walk the talk' for a host of reasons. Still, though, most prefer to obviate unnecessary CSD consumption.

And despite the best intentions and/or optimism of the 7UP marketing team, at the end of the day this product (7UP PLUS) is still a conventional blistery soft drink. It tastes sweet, it's weightless and fizzy, and it fills our tummy with a sweet, fruity flavor - all hallmark characteristic of a fizzy soft drink. Just as the package tells us the social lubricant is made from Splenda and offers 10% of the RDA of iron doesn't aberration the fact that this is a CSD. As one consumer remarked,

'Most of us aren't that stupid...If I want a Sprite I'll drink a Sprite, but it's not like I'm dumb enough to swallow that a 7UP with Splenda and metal farther is somehow improve for me than the Sprite....they're both junk.'

The consumer has grown new a near slavish reliance on traditional CSD offerings in their blood consumption habits. Yes, they will in any case want their Pepsi or Diet Coke or Dr. Pepper on some occasions, but on many others they will be elective understudy beverages. Masquerading your traditional CSD offerings as something other than soft drinks will only make your mark out troupe out of touch and risk alienating your consumer.

Item #4: Interested parties should focus on offering truly innovative beverages that make an grab match for emerging non-CSD occasions.

Whether it be of a felt need to decrease traditional CSD consumption, to drink more water or to experiment with variant beverages, consumers are increasingly demanding more innovative beverages that provide a 'better fit,' for their contemporary lifestyles. So why not strive to meet those needs with truly innovative products?

And while we are sensitive to the costs and risks inherent in true innovation, we would also suggest that the answers may sometimes prove more straightforward than many might imagine.

Boulder-based Izze is a perfect example of this maxim put into practice. Even though their product may get out to the uninitiated as a traditional CSD, in reality it is any but. By focusing on beverages crafted only from 100% fruit juice and sparkling water (nothing more!), entering the marketplace at (relatively) high price points (approximately $1 per 12 oz. bottle), avoiding the traditional QSR fountain channel, and originally emphasizing distributorship in specialty grocers and fast-casual QSR, Izze has transformed what appears remarkably similar to a conventional soft drink into a sophisticated, specialty, 'treat' the cup - the perfect match for an afternoon meeting at Panera, not to mention an ideal kids' treat for health-conscious moms.

Critics may complain that Izze's product is nothing more than a 'CSD in sheep's clothing,' and nutritionists may vigilance that fruit juice is effective of delivering significant sugar, but those criticisms miss the larger point. Namely, whatever Izze is in most consumers' eyes, it is not a traditional CSD. Therefore, it enters into the consideration set of the increasing number of occasions in contemporary life in which we are obliged to decree something other than a traditional CSD.

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