Weakness in soda volumes
In parts 1 and 2 of this series, we discussed the acquisitions of Bai Brands by Dr Pepper Snapple (DPS) and KeVita by PepsiCo (PEP). Weak soda volumes in key markets are making nonalcoholic beverage companies look for growth opportunities in up-and-coming categories like functional beverages. Coca-Cola (KO) and PepsiCo continued to report weak soda volumes in 3Q16.
Performance in 3Q16
In 3Q16, Coca-Cola’s sparkling or soda beverage volumes were unchanged year-over-year. However, the company’s still beverage volumes grew 3% year-over-year. Under Coca-Cola’s still beverage category, bottled water and sports drinks performed well in 3Q16. PepsiCo’s carbonated soft drink volumes were down 3% in 3Q16. The company recorded 7% growth in its noncarbonated beverage volumes in 3Q16.
Carbonated soft drink volumes for Dr Pepper Snapple (DPS) grew 2% in 3Q16. The company’s noncarbonated beverage volumes were flat year-over-year in 3Q16 due to lower volumes of the Hawaiian Punch and Mott’s brands.
Overall, still beverages are looking more promising than soda drinks in terms of future growth. Sports drinks, cold-pressed juices, beverages with organic ingredients and natural sweeteners, bottled water, and ready-to-drink teas are some of the categories where nonalcoholic beverage companies are seeking growth opportunities.
In September 2016, Coca-Cola announced the launch of ready-to-drink tea lattes and coffees under the Gold Peak iced tea brand. These new drinks will launch in 1Q17. Aside from internal innovation, Coca-Cola is also growing its still beverage portfolio through bolt-on acquisitions. Examples of these acquisitions include a minority stake in Aloe Gloe, an aloe water beverage company, and a minority stake in Chi Limited, Nigeria’s leading dairy, juice, and snack company.
Aside from the Bai Brands acquisition we explained in Part 1, Dr Pepper Snapple also acquired a stake in sports drink brand BodyArmor. In April 2016, the company increased its stake in BA Sports Nutrition, the makers of BodyArmor premium sports drinks, from 11.7% to 15.5%.
For more updates, visit our Nonalcoholic Beverages page.