IE 11 is not supported. For an optimal experience visit our site on another browser.

Soda sales to fizzle as people cut back

Most consumers plan to drink about the same amount or less this year, costing beverage companies about $8 billion in sales, according to a study release on Friday.
/ Source: Reuters

Most consumers plan to drink about the same amount or less this year, costing beverage companies about $8 billion in sales, according to a study release on Friday.

About 74 percent of consumers surveyed said they planned to spend the same or less on soft drinks, according to the study by the business advisory firm AlixPartners. For carbonated sodas, about 25 percent planned to spend less, while only 18 percent said they planned to spend more.

The trends were similar for other soft drink categories, including bottled teas and sports and energy drinks. Only bottled juices and coffees saw the number of consumers planning to spend more outweigh those who planned to cut back, according to the survey of 1,000 U.S. consumers.

When it comes to alcoholic drinks, the study conducted in February found that 89 percent plan to spend the same or less.

These patterns could further add to the struggle of beverage giants Coca-Cola Co and PepsiCo, which have both grappled with weak soft drink sales in North America, as well as global beer, wine and spirits players.

"There is a meaningful number of consumers who are planning to spend less and there is a meaningful amount of revenue and profit dollars that are up for grabs," said David Garfield, a co-leader of AlixPartners' consumer products practice and author of the study.

Given tepid demand, rising consumer frugality and little wiggle room on pricing, Garfield said it was important for global beverage companies to improve their cost structures.

"Otherwise, a number of industry players could be in serious financial jeopardy quite soon. It's literally become a matter of survival," Garfield said.

He declined to discuss individual companies but said large players — which include Coca-Cola, Anheuser-Busch InBev and Diageo — tend to have greater scale and therefore their costs represent a smaller percentage of total revenue.

"The winning companies are the ones that recognize they have to continue to drive cost reduction and efficiency while fighting for their portion of the demand curve," he said.

As drink companies battle for market share, they have introduced a bevy of new products, touting health and functionality, among other attributes.

When it comes to choosing drinks, AlixPartners found that being environmentally friendly is the least important attribute for consumers, with taste, price and quality topping the list.