Soft Drinks Industry Outlook: Will Healthy Options Bring Fizz Back?

Non-alcoholic beverages like sparkling soft drinks, juices, enhanced water, sports and energy drinks, and dairy and plant-based beverages are the main constituents of the soft drinks industry. Additionally, some industry participants produce and sell handy foods and snacks, which complement their non-alcoholic flavored and sweetened beverages portfolio.

The soft drinks industry holds a dominant place in the U.S. beverage market, accounting for overall sales of $135.7 billion in 2017, according to Beverage Digest. In fact, this number indicates that American’s spent additional $2 billion on soft drinks last year.

Here are the three major themes in the industry:

  • The U.S. soft drinks industry is currently facing turmoil as consumers are increasingly becoming health conscious. Carbonated drinks, with high sugar content, have been a major cause for the country’s rising obesity problem. Additionally, its zero or low-calorie alternatives are causing health hazards due to their use of artificial sweeteners. This has resulted in a major shift in consumer preference to healthier non-carbonated beverages, leading to a marked slowdown in the carbonated drinks category (CSD).
     
  • The Trump administration’s tariffs on steel and aluminum have increased input costs, making the production of soda cans expensive. Consequently, industry participants anticipate increasing prices for sodas, which could be another reason for customers refraining from buying colas and other drinks. Moreover, escalating freight costs and increase in other input costs are impacting the profitability of industry players. Also, the strengthening of the U.S. dollar is affecting the companies’ businesses across borders.
     
  • Growing preferences for non-carbonated and health drinks has forced soft drink makers to rethink their portfolio. Introduction of health drinks, either by innovation or acquiring new brands, is the main route for most industry players. For example, Coca-Cola (KO) is constantly enhancing its portfolio, as evident from its recent acquisition of the major sports performance and hydration brand — BODYARMOR. The industry biggie has also agreed to buy Costa Coffee as it intends to expand in the on-the-go coffee business. Similarly, PepsiCo (PEP) has inked a deal to buy SodaStream (SODA) to fortify its fast-growing sparkling water portfolio. The industry players are also exploring the options to adopt cannabis-infused drinks that can be a great alternative to the sugary sodas.
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