Soda Makers Scramble to Fill Void as Sales Drop

STEPHANIE STROM

The community garden near her home in Cuba, N.M. With her doctor’s help, Ms. Cowboy realized that sugar from soda was contributing to her weight gain, and she now drinks mostly water.

“We’re not trying to be the pop police or anything, but we felt like we were sending a mixed message by having a healthy lunch program and yet letting everyone walk around with sodas with a bunch of sugar in them,” said Joel Price, superintendent of the district.

Although schools have been removing sodas and other sugary drinks from vending machines for the last few years, the Faulkton district is one of the first in the country to institute a ban, according to the Alliance for a Healthier Generation, which works to reduce childhood obesity.

The school cafeteria will serve water, low-fat milk and fruit juices, and those beverages, as well as sports drinks and noncaffeinated diet sodas sold in vending machines, are all that will be available on school property. “Sure, there will be some opposition to it, but this is the way things are changing, like it or not,” said Kyle Ortmeier, the 17-year-old behind the school’s wellness campaign.

Cold, bubbly, sweet soda, long the American Champagne, is becoming product non grata in more places these days. Schools are removing sugary soft drinks from vending machines at a faster pace, and local governments from San Antonio to Boston are stepping up efforts to take them out of public facilities as the nation’s concerns about obesity and its costs grow.

Last year, the average American drank slightly under two sodas a day, a drop in per capita consumption of about 16 percent since the peak in 1998, according to Beverage Digest, a trade publication.

What began as a slow decline accelerated in the middle of the last decade and now threatens some of the best-known brands in the business. Coke and Pepsi are relying more than ever on the “flat” drinks and bottled waters in their portfolios and on increases in the price of sodas, forcing die-hard drinkers to pay more to feed their sugar habits.

“The question is, Are we seeing a modest, multiyear decline that will bottom out? Or are we seeing the beginning of a paradigm shift away from carbonated soft drinks?” said John Sicher, publisher of Beverage Digest and a longtime observer of the industry. “I don’t think anyone knows yet, but I think there are continuing headwinds against the category that aren’t abating.”

Health advocates are cautiously optimistic about the decline. “It is really important because sugary soft drinks are the No. 1 source of calories in our diets,” said Margo Wootan, director of nutrition policy at the Center for Science in the Public Interest. “We get more calories from sodas and sugary drinks than any other individual food — cake, cookies, pizza, anything.”

But Ms. Wootan and others are worried about what may be taking the place of carbonated soft drinks in the American diet. They note the increasing appetite for energy drinks, loaded with sugar as well as caffeine, and noncarbonated sports drinks, which may have as much sugar as sodas.

“This is the next stage of where battle lines being drawn,” said Dr. Harold Goldstein, executive director of the California Center for Public Health Advocacy, who often totes around a jar filled with two and a third cups of sugar, the amount consumed by drinking a soda every day for one week. “Beverage companies are putting more and more emphasis on selling fortified beverages, as if fortified means healthier when in fact it often means more salt added to sugar.”

Not surprisingly, the country’s largest soda companies insist their carbonated soft drinks business will still grow, if not at as fast a clip as it has historically. “This is not a zero-sum game,” said Sandy Douglas, president of Coca-Cola North America.

But even they concede that unless the industry stumbles upon what it calls the holy grail, an all-natural sweetener with no calories, the future is going to be more firmly anchored in noncarbonated drinks. “The health and wellness trend is huge, permanent and important,” Mr. Douglas said. “My crystal ball says that a smart beverage company will sell a variety of products, and some of them will have bubbles and some of them won’t.”

Coca-Cola and its competitors have spent the last two decades decreasing their reliance on carbonated soft drinks anyway.
For most of its history, for instance, PepsiCo sold Pepsi. It bought Mountain Dew in 1964 and 20 years later, introduced a soda called Slice. Then it added 7Up and Mug Root Beer in 1986.

It played around with those brands, adding diet and other versions. Then, in 1992, it signed a deal with Lipton to sell ready-to-drink teas that initiated a spate of joint ventures, acquisitions and new product introductions. It added brands like Aquafina, SoBe and Sierra Mist — many not carbonated.

“As a business, we first saw this coming several years ago, which led us to get ahead of it with things like Gatorade and Tropicana that have done very well for us,” said Simon Lowden, chief marketing officer for PepsiCo’s North American beverage arm.

The competition, Coca-Cola and Dr Pepper, pursued much the same strategy. All three companies amassed stables of brands that took them far beyond their foundations in carbonated soda, though it remained the cash cow.

At the time, Mr. Lowden said, they were driven by growing multiculturalism on the home front and their expanding global footprint, but their broad portfolios also have cushioned them from the impact of changing attitudes toward soda as the nation wages its war on obesity.

Rufina Cowboy realized how big a role it played in her weight when her daughters Tamara Lewis, 12, and Lisa Cowboy, 11, persuaded her to go on a diet after participating in a program in their hometown, Cuba, N.M. The program, aimed at teaching children about healthy eating, is underwritten by the Robert Wood Johnson Foundation.

Ms. Cowboy started walking more, eating fresh fruits and vegetables and cutting back on meats. “I kept in there, walking on the trail here and eating better, trying to lose weight, but it wasn’t working,” she said.

Her doctor told her it might be the soda she was drinking. “I said, ‘I don’t drink that much,’ but then he added up the sugar in what I was drinking, and it was 25 pounds a year,” Ms. Cowboy said. “I said, ‘Oh, my gosh.’ ” She now drinks mostly water.
Lisa used to drink Dr Pepper. “It makes you dehydrated,” she said. Both she and Tamara, who has juvenile diabetes, have lost weight. Their mother has lost 20 pounds.

In spite of consumers like the Cowboys, beverage companies have been making more money on carbonated soft drinks by raising prices. That allowed revenue from carbonated soft drinks to reach a record high last year of $75.2 billion in the United States, according to Beverage Digest.

In one effort to assuage health-conscious consumers, the companies have been making smaller packages with a wider range of calories. Coca-Cola used to sell roughly eight sizes of packaging, from six-packs of 8-ounce cans to 2-liter plastic bottles. Today it sells more than twice as many types of packages, from a 32-pack of cans sold in warehouse stores to six-packs of 7.5-ounce “mini” cans, sales of which, Mr. Douglas said, “are on fire.”

The big three beverage companies are also endlessly tinkering with combinations of sweeteners and sugars to lower calories without altering taste. PepsiCo, for instance, introduced Pepsi Next, which uses a blend of sweeteners to deliver half the calories of a standard Pepsi, and on Monday, Coke announced it would test-market similarly slimmed-down versions of Sprite and Fanta.

Dr Pepper Snapple has gone even further with 10-calorie versions using a blend of artificial sweeteners and high-fructose corn syrup in many of its carbonated soft drinks. “We have to innovate in ways of getting calories out of beverages and still providing the taste experience people don’t find in today’s diet drinks,” said Jim Trebilcock, executive vice president at Dr Pepper.

Most recently, the beverage companies have gone on the offense against New York City’s longstanding campaign against soft drinks with their first advertising ever in the city subways, promoting these strategies as strides to combat obesity. “We’re dedicated to helping you choose what’s right for you,” one ad says.