Weighing Healthier Options
By the numbers, soft drinks pack a hard punch
by James Russell
James Russell is IASB director of publications.
It's just a can of soda; so what's the big deal?
From the beverage industry's own perspective - in terms of income, jobs,
taxes, market share, political and charitable contributions, federal and state laws, and
the almighty consumer - plenty.
Just consider these figures, reported by the National Soft Drink Association, for the
- $62.9 billion - Retail sales (up from $61.7 billion in 2001)
- $17 billion - Federal and state taxes (corporate, individual, sales and excise)
- 12 billion - Gallons of water used in carbonated soft drinks
- $8 billion - Salaries and wages
- $230 million - Charitable contributions (community, preservation, scholarships, and
- 1.5 million - Support jobs (farmers, retailers, recyclers, containers, vendors,
- $930,163 - Political contributions to federal campaigns (from NSDA, Coke and Pepsi
- 175,000 - Jobs directly related to industry
When you also consider that Americans last year consumed 53 gallons of carbonated soft
drinks (CSDs) per person, and that they had 450 soft drink brands to choose from,
it's easier to understand just how high the stakes are.
Market share and production volume are critical factors to the success of any product.
In 2002, total volume was 10.1 billion cases. Coca Cola controlled the lion's share
- or 44.3 percent - of the market. The beverage giant reported slight increases
in both market share and volume, or 0.6 percent and 2.1 percent, respectively, compared to
its 2001 results.
A nearly equal share of the market was split between the second and third largest soft
drink makers - Pepsi and Cadbury-Schweppes - finishing at 31.4 and 15.0 percent,
respectively. Both lost ground in 2002 (Pepsi, down 0.2 percent, and Cadbury, down 0.6
percent). The remaining 10 percent is divided among the rest of the field.
A closer look at the market shares among the top 10 brands reveals the dominance of the
Coke Classic controls 19.3 percent of the CSD market. That's followed by Pepsi
Cola, 12.6 percent; Diet Coke, 9.0 percent; Mountain Dew (Pepsi), 6.4 percent; Sprite
(Coke), 6.2 percent; Dr. Pepper (Cadbury), 5.9 percent; Diet Pepsi, 5.5 percent; 7Up
(Cadbury), 1.7 percent; Caffeine-free Diet Coke, 1.7 percent; and Diet Dr. Pepper
(Cadbury), 1.7 percent.
Those 10 brands comprise 70 percent of the market. However, all but two of the top 10
brands either lost market share or remained flat from their 2001 figures. Fortunately for
these companies, their investments in new products - driven primarily at young adults
and teenagers - are paying major dividends.
The biggest market gains were reported among newer brands: Pepsi's Mountain Dew
Code Red, Vanilla Coke, Pepsi Twist, Diet Coke with Lemon, and Red Fusion, a Cadbury
Following those sales are the increasingly popular alternatives to CSDs: bottled
waters, fruit drinks, and "energy" beverages. The latter includes such
youth-oriented brands as AMP, Impulse, Pink, Pimp Juice, Red Bull, Monster, KMX Red,
Rush!, Omega, and Adrenaline Rush, to name a few.
So how does the financial health of the soft drink business impact schools, and vice
Beverage companies and schools have had successful partnerships for more than 50 years,
in the form of supplemental funding, scholarships, grants and volunteer programs. These
alliances are generally welcomed by school officials, who seize the opportunity to fund
athletics and sports equipment, after-school activities, field trips, computer technology,
arts and theater with the proceeds.
In return for the revenue, via outright beverage sales or exclusive "pouring
rights" contracts, schools allow soft drink companies advertising and sponsorship
messages on vending machines, scoreboards, and programs.
The National Association of Secondary School Principals (NASSP) recently reported that
92 percent of its principals agree that these arrangements not only enhance educational
programs, but also recognize that they are "an important part of the education
In Illinois alone, these partnerships are worth millions annually to public school
coffers. The soft drink industry, while privately fighting any additional limitations on
such alliances, openly accepts existing state and federal regulations over placement and
operation of vending machines in schools.
Federal law prohibits the operation of soda vending units in cafeterias during
breakfast and lunch hours. And Illinois law defines soda as a "competitive"
food, i.e., confections, candy, chips, fruit drinks, tea, coffee and soda, which must be
controlled to avoid direct competition with non-profit food services.
There is no outright ban on school soft drink sales in Illinois or the U.S. - yet.
However, Illinois is among a number of states with legislation introduced in recent months
that would ban or severely limit soft drink sales in schools.
Naturally, the soft drink companies believe that it is essential for local control to
remain in the hands of local school officials.
According to the National Soft Drink Association, that means: local educators, "in
consultation with students, parents and community groups, (should) determine the placement
of vending machines, the hours of operation, the variety of beverages available, and how
the revenue is spent."
But that's where the rub begins for nutrition specialists and advocates fighting
for childhood obesity protection.
Anticipating what may well be an inevitable losing battle over school sales of
traditional soda, soft drink companies are also preparing new products to allay the fears
of health-conscious consumers.
While the soft drink industry rallies its lobbyists in a united effort to "work
preemptively to prevent punitive legislation," the Big Three are making moves
privately to reshape their product portfolios.
According to industry reports in Beverage World magazine, Coke announced plans
in 2003 to stop marketing carbonated soft drinks to elementary schools. At the same time,
however, the No. 1 soft drink maker introduced Swerve, a lightly carbonated milk-based
beverage tabbed specifically for school sales.
Pepsi, meanwhile, reshaped its product portfolio to divide its brands into three new
categories - Good for You, Better for You, and Fun for You. According to Beverage
World, Pepsi's goal is to have 50 percent of revenue coming from Fun for You
drinks, i.e., full-calorie soft drinks, and 50 percent from the Good and Better product
lines, i.e., fruit juices and water v. health and energy drinks.
Currently, Pepsi revenues are split 3:2 between traditional sodas and the other two
categories, company president and chief operating officer, Indra Nooyi, told the trade
This concession is also opening the door for newcomers to introduce beverages aimed
exclusively at health and wellness concerns. Fortified, sugar-free and lo-carb beverages
along with reduced and mid-calorie fruit drinks with blended sweeteners are among the new
products heading to the marketplace.
But whether these efforts will be sufficient to buffet the rising storm of
nutritionists and politicians insisting that schools can solve childhood obesity by
banning soda sales remains to be seen.
Weighing Healthier Options
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