Despite Popularity, Carbonated Soft Drinks Facing Challenges

CSD Staff
March 7, 2014
Not very long ago, carbonated soft drinks (CSDs) were the rage of a young Baby Boomer generation. Coke and Pepsi ruled the cold door, and life was good for convenience store retailers. But that day has passed, as the category has been flat—or even in decline—for several years, forcing retailers to reset coolers to capitalize on emerging beverage trends.
According to Nielsen convenience store data, soft drinks saw a marginal 3.2% gain in dollar sales between 2011 and 2012. That gain slowed even more between 2012 and 2013, growing just 1% last year. Unit growth was similarly uninspiring, showing 2.3% and 0.5% gains respectively.
Which isn’t to say CSDs have become an afterthought. With $8.2 billion in sales in 2013, CSDs represent the second-largest category in the cold vault (to beer) in the convenience channel. Still, the days of wild growth are likely over for good, and retailers need to keep fleet of foot amidst a constantly changing soft drink landscape. “They keep declining, and there’s not a lot of innovation in the category,” said Butch Fulton, merchandise manager at Plaid Pantry, a 109-store chain based in Oregon. According to Fulton, flavored CSDs have held their own, but cola sales continue to fall. Among traditional CSD brands, Mountain Dew continues to innovate—recently introducing Kick Start, which Fulton described as a cross between a soft drink and an energy drink.
Encroachers Encroaching
Fulton blames encroachment from other categories—such as enhanced and flavored water, RTD tea and energy drinks—as the primary reason for the decline in traditional colas.“Mountain Dew remains popular with kids,” he said. “It might not be as powerful as it was 10 years ago because energy drinks have infringed on that volume. But Mountain Dew in the 20-ounce package is our No. 1 CSD SKU.”
While the category hasn’t exactly been a hotbed of innovation, brands are trying new things. Dr Pepper, for example, has attempted a recent line extension with TEN.According to Bonnie Herzog, beverage analyst at Wells Fargo, Dr Pepper TEN, a 10-calorie alternative to full-calorie and Diet Dr Pepper, is struggling, despite having some loyal followers.
Sugar-free once enjoyed tremendous success, but has since bitten the bullet in the CSD market.“Sugar-free is declining today,” explained Fulton. “Consumers are moving away because of the artificial sweeteners that they’re using. Consumers are looking for natural sweeteners.” ◆
Carbonated Soft Drinks Slow Down Continues
Carbonated soft Drinks may be the second largest category in the cold vault, but their growth is slowing due to competition from other categories, such as energy drinks and teas.

Source: Nielsen C-Track Database and Wells Fargo Securities