Beverage makers who once relied heavily on carbonated soft drink sales are putting more focus on water and sports drinks as consumers show increasing interest in drinks that are lighter and are perceived to be healthier.
Sales volume of carbonated soft drinks — across retail, vending and fountain channels in the United States — fell last year for the first time since 1985, according to Beverage Digest, which said volume slid 0.2 percent. Excluding energy drinks, it fell 0.7 percent.
Among energy drinks, according to Beverage Digest, Red Bull continued its charge, with a sales increase of 41 percent, about the same as the previous year.
Other champions with small market shares who are growing by leaps and bounds: Hansen's Natural, maker of energy drinks, natural sodas, and fruit juices, which had a 72 percent jump in sales, and Rockstar Energy Drink, which rode its "party like a rockstar" slogan to a better than 96 percent increase in sales.
On an individual basis, Beverage Digest said Cadbury Schweppes increased its sales volume of carbonated soft drinks by 0.6 percent in 2005, compared to Coca-Cola, which was down by 0.1 percent for the year and Pepsi, which was down 1.2 percent.
At the same time, sales of non-carbonated drinks increased, a boon for beverage makers working both sides of the aisle, including Coca-Cola Co., PepsiCo Inc. and Cadbury Schweppes PLC.
"I think people have a growing interest in beverages which are lighter and have actual or perceived functional benefit," Beverage Digest editor John Sicher said Thursday. "I think we've seen a decline in regular soft drinks for some time."
Sicher said the trend toward non-carbonated drinks is likely to continue, but he noted beverage makers are prepared for the shift.
"I think we're seeing a consumer shift, but I think Coke and Cadbury and Pepsi are well-positioned to handle this," Sicher said.
Coca-Cola has already got a big stake in the water market, with its Dasani brand, marketed as "purified water enhanced with minerals for a pure, fresh taste." Pepsi's also in the water game, with Aquafina, another bottled water that isn't from a spring, described instead as "100% pure, non-carbonated, purified drinking water."
A spokesman for Atlanta-based Coca-Cola said the company reported last month in its fourth-quarter and year-end earnings release that it saw a 1 percent increase in carbonated soft-drink sales volume in the U.S. for the last three months of 2005, reversing three consecutive quarters of negative performance in the category.
"People want variety," Ben Deutsch said. "You saw this tremendous growth in non-carbs this last year. That's impacting carbonated soft drinks."
Still, Deutsch said Coca-Cola is "very bullish" on carbonated soft drinks going forward.
"We are a total beverage company and we see tremendous opportunity both in carbonated soft drinks and in non-carbs," he said.
In a research note Wednesday, Morgan Stanley analyst William Pecoriello said the rules for success in the soft drink industry are changing rapidly.
"Consumer choices are exploding, consumers have greater knowledge about products, are taking personal responsibility for their health/wellness and growing more sophisticated," he wrote. "The concentrate companies and bottlers need to make changes to their businesses to adapt to this reality."
That reality includes the still-booming premium retail coffee market, which racked up $5.4 billion in sales last year just at Starbucks company-run stores, despite new competition from Dunkin' Donuts - which jumped into the game a few years ago, adding lattes and more to its already successful everyday coffee menu.
Both are lining up their beans against a challenge from the newest kid on the block: McDonald's, which began adding "premium roast" coffee to stores in most major U.S. cities in recent months and plans to start selling it early next week in all of its 13,700 restaurants nationwide.