Understanding the soft drink industry’s key markets

The growing population and rise of the middle class, particularly in emerging markets, are key growth drivers for non-alcoholic beverage companies. Market intelligence firm Euromonitor International estimates the middle class around the world will include 1.5 billion households by 2020, a 25% rise over 2012.

Many companies are innovating products and investing in marketing campaigns that target fast-growing population segments, such as the Hispanic community in the US. Hispanics include people of Cuban, Mexican,Puerto Rican, Southern or Central American descent. People of other Spanish cultures or origins, regardless of race, are also considered Hispanic. Nielsen estimates that by 2015, Hispanics will have $1.5 trillion in buying power, reflecting a significant 50% rise from 2010.

“Millennial” refers to the generation of people who were born between 1981 and 1996. According to Nielson, there are 77 million Millennials in the US, representing 24% of the US population. Millennials make extensive use of social media and mobile devices, and have more product awareness.

Major companies in the soft drink industry, including The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group (DPS), and Monster Beverage Corporation (MNST), are focusing their marketing strategies on this influential demographic group.

The teen population is a core demographic for the soft drink industry. At the 2014 Consumer Analyst Group of Europe conference, Coca-Cola reflected on the importance of the 3.5 billion people who are in their teens and early 20s.

Soft drink companies are part of the consumer staples sector. Investors can access this sector through the Consumer Staples Select Sector SPDR ETF (XLP).