In the last 15 years, soft drink consumption declined by 60% just for teenagers.
Americans are ditching their sugary soft drinks and picking up healthier options, primarily bottled water. People ae turning away from high-priced, high-calorie beverages, leading to a substantial decline in demand.
In fact, soda consumption fell to its lowest point since 2016, with many Americans ditching sugary, carbonated drinks for water, coffee, and other healthier beverages.
This trend change can be attributed to increased prices, health concerns, and market competition, leading to distinct changes in the soft drink industry and related industries.
Reasons for The Drop in Pop
Soda consumption is declining due to the high cost, health risks, and the increasing number of alternative beverages. Together, these factors have caused soda sales to decline massively.
High Prices
One of the top reasons people turn away from soda and soft drinks is the substantial impact inflation has had on these beverage prices. Since the 90s, the price of soda, like everything else, has only increased steadily without any change in the product.
While inflation is unavoidable, it has an exorbitant impact on soft drinks, as high oil prices, the cost of sugar, certain taxes, the rising demand for ethanol, and the cost of creating plastic all skyrocket.
The cost of soda has risen roughly 45% in the last five years, and research suggests that prices will continue to grow.
Increased Health Consciousness
The public’s increased awareness of healthy living habits has also made soda less favorable. The healthcare industry has taken a firm stance against soft drinks, as they offer almost no nutritional value but are high in calories and sugar.
The soda industry experienced a brief uptick in soda consumption following the release of zero-calorie, sugar-free, and diet alternatives. However, this did not last, as the medical community quickly warned people about the dangers of artificial sweeteners and how they are not as beneficial as some think. Diet sodas can lead to weight gain, slowed metabolism, and diseases like diabetes.
Abundance of Alternatives
Lastly, the variety of alternative tasty beverages suffocates the soda industry even more. Even people not bothered by soda’s high prices or health risks have pivoted, enjoying other soft drinks that are just as flavorful and satisfying, such as iced tea.
Americans have a massive variety of beverage options; according to the US Department of Agriculture, there are over 500 drink choices. So soda companies have plenty of competition, and the market is only becoming more saturated as new and innovative drinks hit the shelves.
Shifts Within The Soft Drink Industry
The soft drink industry has seen significant shifts and changes within the last decade. Some of these changes are directly due to reduced consumption, while others are related to public health concerns and environmental considerations.
Questioning Sustainability
Soda has become a public health enemy and a symbol of the world’s greedy plastic consumption and excessive waste production.
While the lack of sustainability within the industry is not the main cause for the declined consumption, large soda companies have developed sustainability approaches to create a positive reputation and bring customers back.
Similarly to the shift toward diet drinks, the industry focuses on sustainability to connect its brands with Millenials and Gen Z.
The Soda Tax
The soda tax is an excise tax on sugary drinks, increasing the cost of soda by roughly one cent per ounce of liquid.
This tax is not nationwide or statewide but is levied in certain cities where lawmakers enacted it. The reason for the soda tax is two-fold: to decrease sugar consumption and raise money. These two benefits are mutually exclusive, which seems convoluted, but that is beside the point.
The tax does not benefit the soda industry, as they do not receive the additional revenue and lose customers and sales over the increased cost. Many companies lobby against this tax to prevent it from further impacting the industry.
Aggressive Acquisitions
Coca-Cola and Pepsi have almost always been the big dogs in the soft drink game, but the industry is only monopolizing more as these giants try to hold onto their customers. As people move away from soda, big cola companies acquire other drink brands to boost sales and ensure they do not lose market share.
Coca-Cola has acquired Costa Coffee, Vitaminwater, Topo Chico, Smartwater, MOJI Beverages, and Fairlife Milk as of 2023.
These acquisitions do not do anything to boost soda consumption, but it's not a leap to assume the mergers can be partly attributed to the decreases in soft drink consumption.
The Way of Water
Beverage trends in the US show that Americans are ditching soda in favor of bottled water. The consumption of bottled water rose 56% between 2017 and 2020, while soft drink consumption dropped by 44%.
Major soda companies recognized this oncoming trend, which is why Pepsi and Coca-Cola both now own multiple water brands.
Considerations for Related Industries
The soft drink industry is intertwined with several other consumer industries, and the decrease in consumption directly affects these other categories.
Vending Machine Operating: The outlook for vending machine companies is not great, as the decline in soft drinks will likely lead to reduced use of vending machines. While some vending machine operators are pivoting to offer healthier options, they will still be impacted by the decline in soda consumption.
Metal Can and Container Manufacturing: As the demand for soda decreases, so does the demand for metal cans and containers. Soft drink manufacturers are the largest metal can and container industry players, so their market revenue is directly intertwined.
Bottled Water Production: As discussed, people are choosing bottled water over soda, so the bottled water industry is booming and will continue to grow until there is a substantial shift toward tap water and reusable bottles.
Syrup and Flavoring Production: Similarly to the connection to the metal can and container industry, syrup and flavoring production companies suffer alongside the soft drink industry. When the demand for soft drinks is low, the demand for syrups and flavorings plummet.
Plastic Bottle Manufacturing: The plastic bottle industry will not suffer as much as the metal can and container industry, as bottled water demand keeps the industry afloat. However, they may take a hit as people move toward reusable bottles and tap water.
While the soda industry still generates billions of dollars annually, the many factors working against them suggest the market will continue to decline as bottled water reigns supreme.
This article was produced and syndicated by Wealth of Geeks.
