Slumping Soft Drink Sales

In addition to inflated portions and excessive sugar, other soda ingredients such as corn syrup, artificial coloring agents, phosphoric acid, brominated vegetable oil, and sodium benzoate are driving consumers to reach for healthier alternatives.⁶ The recent industry shift toward phrases such as "sugar free" or "zero sugar" on soda labels instead of traditional "diet" terminology highlights the ways in which these changing perceptions are impacting consumer buying habits.⁷

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The Sugar-sweetened Beverage Controversy

Soda's stigma seems even more salient considering the numerous Pigouvian taxes that have been proposed and/or enforced on the popular sugary beverage. In 2015, the World Health Organization published a report detailing negative public health effects related to high sugar consumption, which kicked off a flurry of new legislation designed to curb sugar-sweetened beverage (SSB) consumption.⁸

As of 2021, a whopping 54 countries around the world had imposed legislation to curb public consumption of soft drinks and other SSBs, most often in the form of a sugar tax. Here in the U.S., eight regions across seven states and the Navajo Nation implement similar taxes, despite strident resistance from the American Beverage Association and its lobbyists.^{9, 10}

Proponents of such taxes argue frequent consumption of SSBs in a community can cause a ripple effect of negative externalities throughout the population. In theory, additional taxes on these products encourage consumers to make healthier buying choices, while also collecting funds for the community.¹¹ Advocates also argue that these taxes may contribute to lower rates of obesity and diabetes in the local population. Often, these positive effects are strongest in low-income and diverse neighborhoods – areas frequently impacted by chronic health conditions related to poor diet.¹²

Opponents point to data suggesting these taxes are regressive and disproportionately impact lower-income consumers.¹³ Some studies even suggest sugar taxes can divert funds from the community as locals drive further to purchase their groceries in neighboring jurisdictions not subject to this tax.¹⁴ Tax opponents say such shifts in buying habits can negatively impact local businesses, leading to lost jobs.

As the debate rages on, one thing is very clear: modern consumers are reevaluating their beverage buying habits, and sugar-packed sodas are getting harder to swallow.

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Soda Switchups

Needless to say, soft drink manufacturers and purveyors have their work cut out for them as they attempt to convince consumers a glass of soda still fits in with a healthy, modern lifestyle.

Coke's initial attempt to kick the stigma of artificial sweeteners and advance itself as a health-conscious brand came in the form of Coca-Cola Life, a cola formulated with a combination of natural cane sugar and stevia instead of corn syrup and artificial sweeteners. Interestingly, consumers failed to appreciate the new formula, perhaps because it was viewed as an incomplete solution to the sugar problem. In 2017, Coca-Cola Life was discontinued because of lackluster sales that failed to compete with the popularity of Coca-Cola Zero Sugar.^{15, 16}

In 2018, Coca-Cola Japan began experimenting in the functional beverage sector, introducing Coca-Cola Plus – a sugar-free, calorie-free soda with added fiber to help suppress fat absorption and moderate triglycerides after a meal.¹⁷ Unlike some formulations, Coca-Cola Plus was well received, perhaps indicating that consumers are looking for a beverage that's perceived to enhance nutrition, rather than simply stripping calories.

PepsiCo first responded to consumer health concerns by cutting aspartame from the Diet Pepsi formula, hoping to distance their product from negative perceptions of that particular sweetener – a move that didn't last very long or do much to improve the drink's reputation with consumers.¹⁸

On the other hand, the company's vitamin-fortified Kickstart Mountain Dew energy drink brand has been welcomed by consumers with open arms. By including real fruit juice and added vitamins, the "not-an-energy-drink" line has been able to position itself favorably as a healthier breakfast alternative to traditional energy drinks and sodas. Since its launch, the beverage line quickly topped $300 million in annual sales, introduced several new flavors, and added new, lower-caffeine options for evening consumption – proof that innovation can pay off when you target consumers' needs for functional food products.^{19, 20}

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Crafting a New Perception of Soda

As sales of traditional soda brands have peaked, craft sodas are finding their footing in the highly competitive foodservice marketplace. Fior Markets recently published a report indicating the craft soda industry was worth more than half a billion USD in 2020, and continued growth is expected through 2028.²¹ As buying habits continue to evolve, craft soda has struck a chord with consumers searching for something new in the supermarket soda aisle, catching the attention of some big names in the process.

In addition to inspecting soda nutrition labels, buyers of all ages are taking a closer look at the companies they're buying from, with many of them more willing to indulge in a sugary soda when the drink is made by an independent company with wholesome, responsible ingredients.

Both major national players have moved to secure a foothold in the craft soda market under unique brand labels marketed separately from their traditional products. In 2014, Coke acquired Hansen's and Blue Sky Sodas²², both decades-old brands, and now markets them each as craft-style alternatives to mainstream sodas.

Leveraging the smaller brands' names enables Coke to compete against grassroots brands such as Jones Soda Co. and Reed's Inc., but others have taken a different approach. Pepsi entered the market by creating a brand new identity know as Stubborn Soda²³, a line made with fair-trade-certified cane sugar instead of corn syrup and flavored with ingredients such as tarragon and agave. By emphasizing natural ingredients and unique flavors, Stubborn and other craft brands are gaining a share of the soda market in much the same way fast-casual dining disrupted traditional fast food.

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Tips for Refreshing Your Profit

If your soda sales have gone flat, here are some tips to help boost your nonalcoholic beverage sales without relying on fizzy fountain drinks. (In a hurry? Check out our condensed list of Quick Tips here.)

Work in Water

Water is the obvious alternative to sugary drinks, and while some diners are content drinking tap water with a slice of lemon, you may be letting sales pass by if that's the only option on the menu.

Seltzer water, sparkling water, forced-air water; whatever you call it, consumers want it. As buyers of all age groups trend toward healthier lifestyles, their preference for sparkling water has shown significant growth. The global sparkling water market was valued at $29.71bn in 2020, and year over year compound growth has been estimated at 12.6%.²⁴ The bottom line? The sparkling water industry is bubbling over into foodservice, hospitality, and grocery markets with gusto.

There are a couple of ways to take advantage of this trend in your establishment.

• If you're going for a trendy, upscale, or farm-to-table vibe, you can make your own sparkling beverage blends. Many manufacturers and foodservice operators offer low-calorie drinks consisting of sparkling water blended with herbs, fruit juice, and/or edible flowers, and demand for such libations is increasing by leaps and bounds.²⁵ Fresh ingredients sourced from local farmers can up the feel-good factor for consumers and increase sales even further for some establishments.
• A lower-investment route is to add bottled or canned flavored water to the menu as a premium alternative to sugar-packed mixed drinks and sodas. Keep a few types of still, sparkling, flavored, and/or mineral-enriched water on hand to net sales from customers willing to pay more for an effervescent drink without empty calories and additives.

Offer Form & Function

The functional beverage segment is one of the quickest-growing segments of the beverage market, and preliminary data indicates North American markets are particularly receptive to such products.²⁶

This trend presents unique opportunities and challenges when it comes to building a beverage portfolio. In today's fast-paced, health-focused world, products designed to address multiple facets of mind-body health appeal to consumers across most demographics. Mountain Dew successfully targets young males with its Kickstart collection, Coca-Cola Plus has been welcomed by the 40+ crowd, and fresh fruit smoothies sing a siren song to female shoppers under 35.

So how can you make the functional beverage trend work for you?

• For a simple menu upgrade, include bottled and canned beverages such as kombucha, prebiotic sodas, and kefir. Although some functional beverage options have amounts of sugar and/or calories similar to a glass of soda, consumers are more willing to overlook the nutritional drawbacks when a perceived health benefit is offered as well. For extra impact, look for local or small-batch brands that offer appealing novelty to diners.
• Consider what you're already offering: many popular beverages and juice blends contain vitamins and herbs consumers want to add to their diet. Tweak menu descriptions to highlight ingredients sporting a "health halo" effect, such as acai, pomegranate, and blueberry. Even traditional orange juice can be more appealing when menus mention the drink's vitamin C or calcium content.

Don't Forget Frozen

Frozen drinks of all types are steadily increasing in popularity and availability. In fact, Data Bridge Market Research predicts the frozen beverage market will continue to gain market share at an estimated compound annual growth rate of 5.5% through 2028.²⁷ In order to successfully tap the frozen nonalcoholic beverage market, you'll need to highlight each drink's functionality, emphasizing its healthful attributes and ingredients such as fresh fruit, vegetables, herbs, vitamins, proteins, and minerals.

• One way to capitalize on this trend is to add smoothies to your menu as an on-the-go meal alternative or enhancement. Traditional coffee and sandwiches fit into many menus, but modern consumers are responding to food options they perceive as improving nutrition and health. Many people don't have time to make an egg-white omelet or pack a fresh salad for lunch every day but are willing to pay a premium price for a vitamin-packed smoothie.
• Fruit slushies and granitas are also widely popular nonalcoholic frozen menu items that can even serve double duty as a drink and dessert in one. During warm months and at locations such as swimming pools, beachside cafes, and resorts, these fruit-based frozen treats offer a sweet, refreshing alternative to ice cream, milkshakes, and soda floats. Choosing seasonal fruits and adding a pop of flavor such as mint or basil really makes these frozen treats stand out.

Go Back to Basics

Gourmet lemonade and specialty iced tea are nothing new to the food and beverage landscape, but that very familiarity may be what's kept these drinks popular at restaurants of every cuisine and service level. Lemonade and iced tea often are perceived as "better for you" choices compared to fountain soda alternatives, and because of their longevity in American dining culture, these beverages often provide a comfortingly familiar drinking experience to consumers of all demographics.

Put a new twist on those old standbys by experimenting with creative flavors, and it's easy to build a drink menu that offers appealing novelty without pushing consumers outside their comfort zone. As an added bonus, your lemonade base can also make a flavorful addition to beverages on your cocktail menu.

• To position your tea and lemonade strongly as BFY options, develop recipes that use natural ingredients such as real lemon juice, cane sugar, and/or high-quality tea leaves. Avoid additives such as coloring agents, preservatives, and concentrates. Use fresh fruits and herbs to brighten up traditional flavor profiles and place emphasis on whole, natural ingredients included in the beverage rather than added sweeteners.
• Adding bottled, canned, or concentrated tea and lemonade is a simple way to expand your beverage menu, but make sure to consider the brands you're offering, as well as how the drink is served. Many teas and lemonades can be dispensed through existing fountain machines, while others are only available in packaged formats. Choosing brands using natural ingredients and marketing them from a separate dispenser or merchandiser can further underscore the differences between tea, lemonade, and traditional sodas.

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Shopping for Beverage Supplies

If you're wanting to add new beverage options to your menu but aren't sure where to start, you may want to consider the following equipment and supplies:

• Infusion beverage dispensers, available in glass and plastic dispensers, are an eye-catching way to serve house made flavored water.
• Fresh herbs and spices can be prepped with a muddler or mortar and pestle before they're added to water for even more flavor.
• Decorative juice glasses and drink carafes come in dozens of styles for a simple way to add extra oomph to beverage presentation.
• For custom juice blends, a commercial juicer can make quick work of fruits, veggies, and herbs.
• To ensure chunk-free smoothies and spare other kitchen equipment the wear and tear of breaking down frozen food, you can add a commercial drink blender to your kitchen lineup.
• Slushie machines and sorbet machines ensure uniform consistency among all your slushie and granita recipes.
• To quickly prep a large volume of fresh produce for smoothies or other frozen desserts, blast chillers can rapidly lower ingredient temperatures while minimizing ice crystal formation.

References

1. Why Some Food and Drink Companies Lost Sales During the COVID-19 Pandemic. Food Dive. Accessed February 2022.
2. Recent Trends – Per Capita Soft Drink Consumption. Ibisworld. Accessed April 2022.
3. How Many Teaspoons of Sugar Are There in a Can of Coke?. Livestrong. Accessed February 2022.
4. Servings Sizes and Portion Sizes: Making Smaller Sizes the New Normal Again. Food Insight. Accessed April 2022.
5. What Coke Bottles Have Looked Like Throughout History. So Yummy. Accessed April 2022.
6. Beyond the Sugar: Chemicals in Sodas and Their Link to Systemic Diseases and Oral Health. Dentistry IQ. Accessed April 2022.
7. 'Diet' Soda is Disappearing from Store Shelves. CNN Business. Accessed April 2022.
8. The State of Sugar and Health Taxes in 2021. Kerry. Accessed April 2022.
9. Countries That Have Taxes on Sugar-sweetened Beverages (SSBs). Obesity Evidence Hub. Accessed April 2022.
10. As More Cities Eye Soda Tax, Industry Vows to Fight New Tax in Philadelphia. NPR. Accessed February 2024.
11. Lessons Learned from Implementing a Sugar-Sweetened Beverage Tax in Berkeley, California. UC Davis. Accessed April 2022.
12. Do Soda Taxes Work? Using Politics and Science to Reduce Obesity and Diabetes. Berkeley Public Health. Accessed April 2022.
13. The Case Against Soda Taxes. Tax Foundation. Accessed April 2022.
14. The Evidence is Clear: Sugar Taxes Just Don't Work. Prospect Magazine. Accessed April 2022.
15. Failure Case Study: Coca-Cola Life - Targeting the "Middle Ground" Fails to Resonate with Consumers. Business Wire. Accessed September 2023.
16. 'Coca-Cola Life's Demise Always Felt Inevitable'. MarketingWeek. Accessed April 2022.
17. Coca-Cola Plus®: New Coca-Cola Variant with Clear Function Benefit. The Coca-Cola Company. Accessed April 2022.
18. Aspartame-free Diet Pepsi Isn't Working Out So Well. Fortune. Accessed February 2022.
19. MTN DEW® KICKSTART™ Expands Product Lineup with Introduction of Four Bold New Flavors. Pepsico. Accessed February 2022.
20. PepsiCo's New Mountain Dew Kickstart Flavors Target 'Cross-cultural Millennial Males. Beverage Daily. Accessed April 2022.
21. Global Craft Soda Market Is Expected to Reach USD 855.22 Million by 2028 : Fior Markets. Globe Newswire. Accessed April 2022.
22. Hansen's and Blue Sky Sodas Get New Looks, New Packaging, New Taglines in Extensive Brand Relaunches. The Coca-Cola Company. Accessed February 2022.
23. It's good to be Stubborn. Business Insider. Accessed February 2022.
24. Sparkling Water Market Size, Share & Trends Analysis Report by Product (Natural/Mineral, Caffeinated), By Distribution Channel (Hypermarket & Supermarket, Online), By Region, And Segment Forecasts, 2021 - 2028. Grand View Research. Accessed April 2022.
25. Flavored Water Market By Product Types (Carbonated And Still), By Packaging Types (Bottles And Cans), By Distribution Channels (Store Based, Supermarkets & Hypermarkets, And Convenience Stores) And Regions (Asia Pacific, Europe, North America, Middle East & Africa, And Latin America) – Global Industry Analysis, Growth, Share, Size, Trends And Forecast 2021 – 2028. DataIntelo. Accessed April 2022.
26. Growth: Global Functional Beverages Market Expected to Rise at a CAGR of 6.6% and Surpass $212,286.1 Million during the Forecast Period from 2021 to 2028. GlobeNewswire. Accessed April 2022.
27. Market Analysis and Insights : Global Frozen Drinks Market . Data Bridge Market Research. Accessed April 2022.