Remember last fall when a college freshman posted a picture of “Dewitos” (Doritos-flavored Mountain Dew) being sampled on campus? Claims of a hoax, a slew of witty puns, and the requisite Stephen Colbert jibes (remember him, too?) quickly followed. PepsiCo ultimately confirmed that, yes, Dewitos is for real.
But while Franken-sodas can stir up a viral frenzy, that attention alone isn’t enough to solve Big Soda’s big problem: sugary soda consumption is on the decline.
According to a report by Beverage Digest on the current state of the soda industry, total U.S. carbonated soft drink (CSD) volume is down for the tenth straight year. Two of Big Soda’s Big Three – Coca-Cola and PepsiCo – lost volume (Dr Pepper Snapple’s volume was flat), with share going to energy drink companies like Monster (in which, interestingly, Coca-Cola owns a 16.7% equity stake), Red Bull, and Rockstar. And, per capita soda consumption fell to its lowest level since 1986: 674 eight-ounce servings (or, about 42 gallons) per person per year.
The major challenge facing Big Soda today is that it can no longer expect consumers to enjoy a one-size-fits-all, sugary-sweet carbonated beverage. Of course, Coke, Pepsi, Sprite, Mountain Dew, and Dr Pepper will always have their diehard drinkers. But the key for the industry’s future success is embracing and reaching niche audiences through niche products, and innovating for the younger Millennial and Gen Z consumer taste buds that crave quality, better-for-you, all-natural sodas – all on their terms.
A Not-So-Sweet Future?
A mindset of health-conscious food and beverage consumption is permeating America’s pantries and refrigerators. And soda is certainly not immune. According to a 2014 Gallup poll, 63 percent of Americans claim to avoid soda in their diet, while more than half say they avoid sugar. And, in a report from C Space, more than a quarter of Millennial consumers (ages 18 to 32) say buying organic food products is a vital part to maintaining an overall healthy lifestyle.
Big Soda isn’t ignoring the trend. In September, Coke, PepsiCo, and Dr Pepper Snapple each pledged to reduce the number of calories Americans consume via sugary sodas by 20 percent on average by 2025, through tactics including new distribution and packaging innovations, consumer education programs, and changes in marketing.
This move has kick-started the “mid-calorie” Cola Wars. Coca-Cola Life and Pepsi True – lower-calorie, reduced-sugar (but not diet), reduced-portion-size sodas – are already being sold and marketed to health-conscious audiences. Time (and consumers) will be the ultimate judge as to whether mid-calorie sodas will fizz on, or fizzle out.
Cola Gets Crafty and Custom
Following the lead of the craft beer phenomenon, PepsiCo is making headway in appealing to consumers’ ever-growing love of all things “craft.” The company’s Caleb’s Kola is an artisanal craft soda made from ingredients like fair trade cane sugar and kola nut extract and sold in classic glass bottles with a vintage-y blue and white label. Named after Pepsi’s inventor, Caleb Bradham, Caleb’s Kola is both a throwback to PepsiCo’s 19th century roots and an appeal to Millennials who may want a bit of hipster-ish, olde tyme nostalgia in their pop. Besides Caleb’s, this summer PepsiCo is launching yet another craft cola, Stubborn Soda. Available in flavors like black cherry with tarragon, orange hibiscus, and agave vanilla cream, Stubborn is also made with fair trade cane sugar and natural flavors, but it will only be available – at least for now – on specialty fountain taps in select restaurants.
As DIY and artisanal become the new normal of American consumerism and consumption, Big Soda is finding ways to fit in. Soda makers are partnering with home carbonation system manufacturers to give consumers the convenience and enjoyment of customized, at-home beverage making. Coca-Cola, for example, has invested heavily in a partnership with Keurig Green Mountain; the cola giant owns 16% of the company and will – along with Dr Pepper Snapple – provide pods for the Keurig Kold at-home soft drink making system slated for release this fall. “It’s all about the choice,” says Coca-Cola CEO Muhar Kent of the partnership. “This allows a practicality for consumers to take more choices to their homes, whether it’s mixers or whether it’s sparkling drinks or whether it’s still drinks.”
Big Soda is making big investments in going niche to keep up with consumers’ changing tastes and needs. Less sugar, quality ingredients, and greater choice and customization are just the beginning as the industry innovates to whet consumers’ interests, wet their whistles, and, ultimately, whittle their waistlines.