Carbonated Drinks - US - May 2008

SCOPE AND THEMES
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
CSD market shows moderate growth, but FDMx sales continue to fall
Carbonated drinks declining in FDMx, seltzer is growing
Market leaders are struggling in FDMx
Encroaching competition and bad press hurting sales, but inspiring innovation
Health trends negatively impact sales
Innovations will drive sales
New products emerge but manufacturers need to protect flagship brands
Coca-Cola and PepsiCo are trying to balance new products while leveraging key brands
Key demographics influencing market: youth, gender, and ethnicity
Teens and young adults are core demographic, but declining
Current pressures on the teen market include:
Income related to CSD consumption
Women are leaving the category, but men are migrating to diet sodas
Ethnicity key factor in consumption and brand choice
Nutrition does not sell CSDs of any type
INSIGHTS AND OPPORTUNITIES
The challenge
What are manufacturers doing?
What should manufacturers be doing?
Protect the core brand
Remind consumers why they like your product
Don’t mess with success
Take control of brand perceptions
Entice new consumers by taking steps toward a healthier soda
Eliminate high-fructose corn syrup and move to natural, but less, sugar
Go after new consumers for healthy (and yes, diet) drinks
FAST FORWARD TRENDS
Consistency
What's it about?
What we've seen
How does consistency apply to carbonated beverages?
Play Ethic
What's it about?
What we've seen
How does this play ethic apply to carbonated beverages?
MARKET SIZE AND FORECAST
Key points
Health concerns and desire for new products are key factors for decline
Figure 1: Total U.S. sales and forecast of carbonated beverages, at current prices, 2002-12
Figure 2: Total U.S. sales and forecast of carbonated beverages at inflation-adjusted prices, 2002-12
Wal-Mart sales
COMPETITIVE CONTEXT
Key points
U.S. consumers want healthier beverages
Energy and health/function—competition and innovation driver
PepsiCo poised for success
Evaporated cane juice, caffeine, and natural flavor changing landscape
Increase the natural
And the less natural
CSDs no longer available in schools
Competitive beverages
Figure 3: U.S. sales and forecast of non-alcoholic beverages, at current prices, by segment, 2002-12
SEGMENT PERFORMANCE
Key points
CSD segments are changing
Figure 4: U.S. FDMx sales and forecast of carbonated beverages, at current prices, 2002-12
Figure 5: U.S. FDMx sales and forecast of carbonated beverages, at inflation-adjusted prices, 2002-12
Sales of carbonated beverages, by segment
Figure 6: U.S. FDMx sales and forecast of carbonated beverages, at current prices, by segment, 2002-12
SEGMENT PERFORMANCE—REGULAR CARBONATED BEVERAGES
Key points
Regular sodas blamed for many health problems
Competition getting stronger
Growth depends on appealing to Hispanics, blacks, teens and adults aged 18-24
And targeting consumers who will age out of the energy drink segment
Sales of regular carbonated beverages
Figure 7: U.S. sales and forecast regular carbonated beverages, at current prices, 2002-12
SEGMENT PERFORMANCE—DIET CARBONATED BEVERAGES
Key points
Fear and scepticism towards artificial sweeteners is a road-block to popular acceptance
Health benefits of diet soda are questionable
Consumers like flavor and caffeine in diet sodas
Sales of diet carbonated beverages
Figure 8: U.S. sales and forecast of diet carbonated beverages, at current prices, 2002-12
SEGMENT PERFORMANCE—SELTZERS
Key points
Bubbles without guilt
Sales of tonic, seltzer, and club soda
Figure 9: U.S. sales and forecast of tonic, seltzer, and club soda, at current prices, 2002-12
RETAIL CHANNELS—SUPERMARKET, DRUG AND OTHER STORES
Key points
Discount and supercenters continue to take share from supermarkets
Decreased consumption reflected most in supermarkets
Drug stores and other channels show robust growth
Figure 10: U.S. sales of carbonated beverages, by retail channel, 2005 and 2007
Figure 11: U.S. sales of carbonated beverages at supermarkets, 2002-07
Figure 12: U.S. sales of carbonated beverages at drug stores, 2002-07
RETAIL CHANNELS—CONVENIENCE STORES
Key points
Convenience stores growing in carbonated drink sales
Figure 13: Carbonated beverage sales in convenience stores, 2005-07
RETAIL CHANNELS—NATURAL CHANNEL/SPINS
Key points
Natural stores showing growth
Figure 14: Natural product supermarket retail sales of carbonated beverages, at current and constant prices, 2005-07
Natural channel sales by segment
Figure 15: Natural product supermarket retail sales of carbonated beverages, by segment, 2005 and 2007
Natural supermarket channel sales soda
Figure 16: Natural product supermarket retail sales of sodas, at current and constant prices, 2005-07
Sugar-sweetened versus fruit juice-sweetened soda
Figure 17: Natural product supermarket retail sales of sodas, by type of sweetener, 2005 and 2007
Organic soda sales
Figure 18: Natural product supermarket retail sales of organic sodas, 2005 and 2007
Natural supermarket channel sales of sparkling water
Figure 19: Natural product supermarket retail sales of sparkling water, at current and constant prices, 2005-07
Brand sales
Carbonated beverages
Figure 20: Manufacturer brand natural supermarket sales of carbonated beverages, 2005 and 2007
Sparkling water
Figure 21: Manufacturer brand natural supermarket sales of sparkling water, 2005 and 2007
Figure 22: Natural product supermarket retail sales of carbonated beverages, at current and constant prices, 2005-07
MARKET DRIVERS
Health concerns
Figure 23: New diabetes cases, by age, 2005
Figure 24: Percentage of U.S. population over the age of 20 who are obese, 2001-07
Figure 25: Prevalence of overweight among children and adolescents aged 2-19, 1999-2004
Figure 26: Reasons for drinking less regular soda today than a year ago, February 2007
Healthy lifestyles
Demographics and changing tastes
Figure 27: Population, by race and Hispanic origin, 2003-13
Figure 28: Population, by age, 2003-13
LEADING COMPANIES
Key points
Leading companies diversifying into non-carbonated beverages to counter declining FDMx sales in carbonated drinks
Figure 29: Sales of leading carbonated beverage companies at FDMx, 2005 and 2007
BRAND SHARE—REGULAR CARBONATED BEVERAGES
Key points
Coca-Cola sees growth with Fanta and Seagram’s
PepsiCo flag brands also falling but Mug and Sierra Mist do well
Figure 30: FDMx brand sales of regular carbonated beverages in the U.S., 2005 and 2007
BRAND SHARE—DIET CARBONATED BEVERAGES
Key points
Coca-Cola’s diet brands are holding steady, but growth comes from male-oriented Coke Zero
Pepsi One was less successful but Diet Mountain Dew is going strong
Cadbury Schweppes/Dr Pepper Snapple Group sees modest declines in FDMx sales
What can manufacturers do to grow this segment?
Growth requires new markets—look to men
Persuade consumers these are safe…build a better product
Innovation occurring among major manufacturers
Figure 31: FDMx brand sales of diet carbonated beverages in the U.S., 2005 and 2007
BRAND SHARE—SELTZERS
Key points
Seltzer on the verge of trendy
Figure 32: FDMx brand sales of seltzers in the U.S., 2005 and 2007
BRAND QUALITIES
Key points
Helping consumers re-embrace brands
Mountain Dew and Dr. Pepper focus on youth
Coke Zero and Diet Pepsi Max battle it out over young male demographic
Cadbury licenses beverage brands to food companies…
…and focuses on Hispanic market
INNOVATION AND INNOVATORS
Key points
Figure 33: New carbonated drink products in the U.S., by company, 2002-08
Figure 34: New non-alcoholic drink products in the U.S., by company, 2002-08
Pepsi's widening carbonated beverage portfolio
Mountain Dew Touts “Game Fuel”
Coconut and pomegranate current flavor trends
Less plastic, less waste
ADVERTISING AND PROMOTION
New media even for older demographic
Figure 35: 7UpTelevision ad, 2007
Figure 36: Coca-Cola Zero Television ad, 2007
Figure 37: Dr. Pepper Television ad, 2007
Figure 38: Pepsi Diet MaxTelevision ad, 2007
CONSUMPTION TRENDS—ADULT CONSUMERS
Regular colas
Diet colas
Other “regular” carbonated beverages
Other “diet” carbonated beverages
Regular soda
Diet soda
Key points
Health concerns drive consumers away from carbonated drinks
Perpetual dieting
Women are leaving the category
Figure 39: Trended consumption of regular and diet soda—adults, 2002-07
Figure 40: Trended consumption of regular and diet cola—adults, by gender, 2002-07
Figure 41: Mean number carbonated beverages consumed in past seven days, by gender, age, race/ethnicity and household income, January-November 2007
Figure 42: Regular soda consumption current vs. one year ago, March 2008
Figure 43: Diet soda consumption current vs. one year ago, March 2008
Figure 44: Reasons for drinking less regular soda, March 2008
INCOME A KEY DIFFERENTIATOR IN CONSUMER CHOICE
Key points
Healthy living is easier with higher incomes
Figure 45: Consumption of carbonated beverages, by type and income, May 2006-June 2007
Figure 46: Volume of consumption of carbonated beverages, by type and income, May 2006-June 2007
TEEN CONSUMPTION
Key points
Teens continue to be top CSD demographic
The youngest consumers don’t drink much, but they learn fast
Figure 47: Consumption of carbonated drinks—children, teens and adults, by age, May 2006-June 2007
Figure 48: Trended consumption of regular and diet soda—teens, 2002-07
The big drinkers in the category are moving away
Figure 49: Trended mean number of glasses of soda consumed per week—teens, 2002-07
Teen brand preferences
Figure 50: Teen regular cola brand preferences, by gender, January-November 2007
Figure 51: Teen regular non-cola brand preferences, by gender, January-November 2007
Figure 52: Teen diet cola brand preferences, by gender, January-November 2007
Figure 53: Teen diet non-cola brand preferences, by gender, January-November 2007
RACE AND ETHNICITY
Key points
Culture makes a difference in carbonated beverage consumption
Consumption decreasing/following overall trends
Figure 54: Consumption of carbonated beverages, by race/ethnicity, January-November 2007
Figure 55: Consumption of carbonated beverages—black respondents, 2003-07
Figure 56: Consumption of carbonated beverages—Hispanics, 2003-07
Figure 57: Mean number carbonated beverages consumed in past seven days, by race/ethnicity, May 2006-June 2007
ATTITUDES AND MOTIVATIONS
Health beliefs
Key points
Black health beliefs coincide with consumption
Figure 58: health concerns about regular and diet soda, by race/ethnicity, march 2008
Mothers most concerned about health
Figure 59: Health concerns about regular and diet soda, by moms, march 2008
CONSUMPTION OF SUBSTITUTE BEVERAGES
Key points
Dichotomy: Rise of sugary caffeine and pure water among teens
Functional beverages are often CSD substitutes
Figure 60: Consumption of selected non-carbonated beverages, by gender, March 2008
Figure 61: Consumption of selected non-carbonated beverages, by age, March 2008
Figure 62: Trended mean number of glasses of soda and competing drinks consumed per week—adults, 2002-07
Figure 63: Trended mean number of glasses of soda and competing drinks consumed per week—teens, 2002-07
CLUSTER ANALYSIS—WEIGHT WATCHERS, EVERYDAY SODA DRINKERS, SODA ENTHUSIASTS
Key points
Weight Watchers
Everyday (core) Soda Drinkers
Soda Enthusiasts
Cluster tables and demographics
Figure 64: Health concerns and attitudes about soda, by clusters, March 2008
Figure 65: Which of the following statements describe you?, by clusters, March 2008
Figure 66: Have you bought any of the following brands of carbonated beverages in the last three months?, by clusters, March 2008
Figure 67: by clusters, March 2008
Figure 6: For the next question, please think about how much diet soda you drink during a typical week. Compared to a year ago, would you say you drink…?, by clusters, March 2008
Figure 68: Carbonated drinks clusters, by gender, March 2008
Figure 69: Carbonated drinks clusters, by age, March 2008
Figure 70: Carbonated drinks clusters, by income, March 2008
Figure 71: Carbonated drinks clusters, by race, March 2008
Figure 72: Carbonated drinks clusters, by Hispanic origin, March 2008
Cluster methodology
CUSTOM CONSUMER GROUPS
Key points
Figure 73: Custom consumer groups, March 2008
Figure 74: Custom consumer groups and identification and CSDs, March 2008
IRI/BUILDERS PANEL DATA
Consumer insights—regular and diet carbonated soft drinks
Carbonated soft drinks
Regular soft drinks
Purchase measures—Regular CSD
Figure 75: Key purchase measures for regular soft drinks, sector and major brands, 2007*
Low-calorie soft drinks
Figure 76: Key purchase measures for low-calorie soft drinks, sector and major brands, 2007*
APPENDIX: IRI/BUILDERS PANEL DATA DEFINITIONS
APPENDIX: OTHER USEFUL CONSUMER TABLES
Consumption data by key demographics
Figure 77: Trended mean number of glasses of soda consumed per week—adults, 2002-07
Figure 78: Consumption of carbonated drinks, by gender, May 2006-June 2007
Changes in CSD consumption from a year ago
Figure 79: Changes in consumption from a year ago of regular and diet sodas, by gender, March 2008
Consumer Regular and Diet Cola Brand Preferences by Ethnicity
Figure 80: Regular cola brand preferences, by race/ethnicity, May 2006-June 2007
Figure 81: Diet cola brand preferences, by race/ethnicity, May 2006-June 2007
Consumer Brand Preferences in Regular Colas by Age
Figure 82: Regular cola brand preferences, by age, May 2006-June 2007
Consumer Brand Preferences in Regular Colas by Income
Figure 83: Regular cola brand preferences, by income, May 2006-June 2007
Consumer Brand Preferences in Regular Non-Colas by Gender and Ethnicity
Figure 84: Regular non-cola brand preferences, by gender and race/ethnicity, May 2006-June 2007
Consumer Brand Preferences in Regular Non-Colas by Age
Figure 85: Regular non-cola brand preferences, by age, May 2006-June 2007
Consumer Brand Preferences in Diet Non-Colas by Gender and Ethnicity
Figure 86: Diet non-cola brand preferences, by gender and race/ethnicity, May 2006-June 2007
Consumer Brand Preferences in Sparkling Water, Seltzers, and Natural Sodas by Ethnicity
Figure 87: Sparkling water, seltzer, and natural soda preference, by race/ethnicity, May 2006-June 2007
Consumer Brand Preferences in Sparkling Water, Seltzers, and Natural Sodas by Income
Figure 88: Sparkling water, seltzer, and natural soda preference, by income level, May 2006-June 2007
APPENDIX: TRADE ASSOCIATIONS