Soda Makers Scramble to Fill
Void as Sales Drop
By STEPHANIE STROM Published: May 15, 2012
In much the
same way their ancestors on the prairie had to check their guns at the door of
the saloon, the 320 students in the Faulkton Area School District in tiny
Faulkton, S.D., will be required to dispose of all carbonated soda containers
before stepping into school buildings.
“We’re not
trying to be the pop police or anything, but we felt like we were sending a
mixed message by having a healthy lunch program and yet letting everyone walk
around with sodas with a bunch of sugar in them,” said Joel Price,
superintendent of the district.
Although
schools have been removing sodas and other sugary drinks from vending machines
for the last few years, the Faulkton district is one of the first in the
country to institute a ban, according to the Alliance for a Healthier
Generation, which works to reduce childhood obesity.
The school
cafeteria will serve water, low-fat milk and fruit juices, and those beverages,
as well as sports drinks and noncaffeinated diet sodas sold in vending
machines, are all that will be available on school property. “Sure, there will
be some opposition to it, but this is the way things are changing, like it or
not,” said Kyle Ortmeier, the 17-year-old behind the school’s wellness campaign.
Cold,
bubbly, sweet soda, long the American Champagne, is becoming product non grata
in more places these days. Schools are removing sugary soft drinks from vending
machines at a faster pace, and local governments from San Antonio to Boston are
stepping up efforts to take them out of public facilities as the nation’s
concerns about obesity and its costs grow.
Last year,
the average American drank slightly under two sodas a day, a drop in per capita
consumption of about 16 percent since the peak in 1998, according to Beverage
Digest, a trade publication.
What began
as a slow decline accelerated in the middle of the last decade and now
threatens some of the best-known brands in the business. Coke and Pepsi are relying
more than ever on the “flat” drinks and bottled waters in their portfolios and
on increases in the price of sodas, forcing die-hard drinkers to pay more to
feed their sugar habits.
“The
question is, are we seeing a modest, multiyear decline that will bottom out? Or
are we seeing the beginning of a paradigm shift away from carbonated soft
drinks?” said John Sicher, publisher of Beverage Digest and a longtime observer
of the industry. “I don’t think anyone knows yet, but I think there are
continuing headwinds against the category that aren’t abating.”
Health
advocates are cautiously optimistic about the decline. “It is really important
because sugary soft drinks are the No. 1 source of calories in our
diets,” said Margo Wootan, director of nutrition policy at the Center for
Science in the Public Interest. “We get more calories from sodas and sugary
drinks than any other individual food — cake, cookies, pizza, anything.”
But Ms.
Wootan and others are worried about what may be taking the place of carbonated
soft drinks in the American diet. They note the increasing appetite for energy
drinks, loaded with sugar as well as caffeine, and noncarbonated sports drinks,
which may have as much sugar as sodas.
“This is the
next stage of where battle lines being drawn,” said Dr. Harold Goldstein,
executive director of the California Center for Public Health Advocacy, who
often totes around a jar filled with two and a third cups of sugar, the amount
consumed by drinking a soda every day for one week. “Beverage companies are
putting more and more emphasis on selling fortified beverages, as if fortified
means healthier when in fact it often means more salt added to sugar.”
Not
surprisingly, the country’s largest soda companies insist their carbonated soft
drinks business will still grow, if not at as fast a clip as it has
historically. “This is not a zero-sum game,” said Sandy Douglas, president of Coca-Cola North
America.
But even
they concede that unless the industry stumbles upon what it calls the holy
grail, an all-natural sweetener with no calories, the future is going to be
more firmly anchored in noncarbonated drinks. “The health and wellness trend is
huge, permanent and important,” Mr. Douglas said. “My crystal ball says that a
smart beverage company will sell a variety of products, and some of them will
have bubbles and some of them won’t.”
Coca-Cola
and its competitors have spent the last two decades decreasing their reliance
on carbonated soft drinks anyway.
For most of
its history, for instance, PepsiCo sold Pepsi. It bought Mountain Dew in 1964
and 20 years later, introduced a soda called Slice. It bought the international
rights to 7Up and added Mug Root Beer to its lineup in 1986.
It played
around with those brands, adding diet and other versions. Then, in 1992, it signed
a deal with Lipton to sell ready-to-drink teas that initiated a spate of joint
ventures, acquisitions and new product introductions. It added brands like
Aquafina, SoBe and Sierra Mist — many not carbonated.
“As a business, we first saw this coming
several years ago, which led us to get ahead of it with things like Gatorade and
Tropicana that have done very well for us,” said Simon Lowden, chief marketing
officer for PepsiCo’s North American beverage arm.
The
competition, Coca-Cola and Dr Pepper, pursued much the same strategy. All three
companies amassed stables of brands that took them far beyond their foundations
in carbonated soda, though it remained the cash cow.
At the time,
Mr. Lowden said, they were driven by growing multiculturalism on the home front
and their expanding global footprint, but their broad portfolios also have
cushioned them from the impact of changing attitudes toward soda as the nation
wages its war on obesity.
Rufina
Cowboy realized how big a role it played in her weight when her daughters
Tamara Lewis, 12, and Lisa Cowboy, 11, persuaded her to go on a diet after
participating in a program in their hometown, Cuba, N.M. The program, aimed at
teaching children about healthy eating, is underwritten by the Robert Wood
Johnson Foundation.
Ms. Cowboy
started walking more, eating fresh fruits and vegetables and cutting back on
meats. “I kept in there, walking on the trail here and eating better, trying to
lose weight, but it wasn’t working,” she said.
Her doctor
told her it might be the soda she was drinking. “I said, ‘I don’t drink that
much,’ but then he added up the sugar in what I was drinking, and it was 25
pounds a year,” Ms. Cowboy said. “I said, ‘Oh, my gosh.’ ” She now drinks
mostly water.
Lisa used to
drink Dr Pepper. “It makes you dehydrated,” she said. Both she and Tamara, who
has juvenile diabetes, have lost
weight. Their mother has lost 20 pounds.
In spite of
consumers like the Cowboys, beverage companies have been making more money on
carbonated soft drinks by raising prices. That allowed revenue from carbonated
soft drinks to reach a record high last year of $75.2 billion in the United
States, according to Beverage Digest.
In one
effort to assuage health-conscious consumers, the companies have been making
smaller packages with a wider range of calories. Coca-Cola used to sell roughly
eight sizes of packaging, from six-packs of 8-ounce cans to 2-liter plastic
bottles. Today it sells more than twice as many types of packages, from a
32-pack of cans sold in warehouse stores to six-packs of 7.5-ounce “mini” cans,
sales of which, Mr. Douglas said, “are on fire.”
The big
three beverage companies are also endlessly tinkering with combinations of
sweeteners and sugars to lower calories without altering taste. PepsiCo, for
instance, introduced Pepsi Next, which uses a blend of sweeteners to deliver
half the calories of a standard Pepsi, and on Monday, Coke announced it would
test-market similarly slimmed-down versions of Sprite and Fanta
Dr Pepper
Snapple has gone even further with 10-calorie versions using a blend of
artificial sweeteners and high-fructose corn syrup in many of its carbonated
soft drinks. “We have to innovate in ways of getting calories out of beverages
and still providing the taste experience people don’t find in today’s diet
drinks,” said Jim Trebilcock, executive vice president at Dr Pepper.
Most
recently, the beverage companies have gone on the offense against New York
City’s longstanding campaign against soft drinks with their first advertising
ever in the city subways, promoting these strategies as strides to combat
obesity. “We’re dedicated to helping you choose what’s right for you,” one ad
says.