Declining soda volumes
Soda volumes have been falling over the years due to rising health concerns and challenging conditions in developed markets. According to Beverage Digest, US carbonated soft drinks (or CSD) volume declined by 3% in 2013 to 8.9 billion 192-ounce cases—back to 1995 levels.
To offset the impact of declining soda volumes, The Coca-Cola Company (KO), along with its closest rival, PepsiCo, Inc. (PEP), and other peers like Dr Pepper Snapple Group (DPS) and Cott Corporation (COT), are looking to expand into growth categories like ready-to-drink tea, energy drinks, and bottled water.
Bottled water, both still and sparkling, offers an attractive growth opportunity. Consumers across the world are becoming more aware of the health benefits of drinking water. According to Statista, a statistical portal, Mexico had the highest per-capita consumption of bottled water at 67.3 gallons in 2013. In the US, per-capita bottled water consumption surged by 12% from 2008 to 2013, to 32 gallons.
Coca-Cola has a strong bottled water portfolio. It includes Glaceau Smartwater, Glaceau Vitamin Water, and Dasani. The company is keen on expanding its portfolio to capture the rapid growth in this category.
Consumers moving away from soda drinks are looking for healthier options like tea. Tea contains flavonoids, which have antioxidant properties. Coca-Cola’s ready-to-drink tea portfolio includes brands like Gold Peak, Honest Tea, and Fuze Tea.
Coca-Cola is also looking to expand further into other non-soda categories, like juices and value-added dairy products.
In the next part of this series, we’ll discuss how Coca-Cola is leveraging partnerships with companies that have a strong presence in the rapidly growing categories of non-alcoholic beverages.
The non-alcoholic beverage industry is part of the consumer staples sector. You can invest in this sector through exchange-traded funds (or ETFs) like the Consumer Staples Select Sector SPDR ETF (XLP). Other ETFs with holdings in Coca-Cola and PepsiCo include the SPDR MSCI World Quality Mix ETF (QWLD).