The soft drink industry sees first dollar sales decline in a year
The carbonated soft drinks (CSD) industry has been in a precarious state for some time now. While lawmakers and courts are siding with soda manufacturers on an ideological level, consumer bases are evolving and are increasingly looking for something new and different from their soft drinks—something more natural and less caloric than the original model. This has been leading to lower sales, even when consumers have all the freedom in the world to buy as many large soft drinks as they want.
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According to new Nielsen scan data, dollar sales for soft drinks through June dropped for the first time in a year:
"Total CSD dollar sales in all channels were down -0.2% (and up +1.4% for prior 12 weeks) during the four-week period ending June 13, 2015, driven by solid average equivalent price growth of +4.2% but offset by equivalent unit volume declines of -4.2%," according to a Wells Fargo Securities research report citing Nielsen data.
This study of dollar sales is different from unit sales, which have been in a steadier decline. The data also indicates that PepsiCo is bearing the brunt of this trend with a 2.5 percent sales decline, the result of double-digit volume decline in “nearly half” of PepsiCo’s CSD products. The report notes an influx of pricier “premium” products from PepsiCo launched this year, like Mountain Dew Kickstart—it’s possible that consumers just weren’t interested in these new offerings, especially at a higher price point.
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While Coca-Cola and Dr. Pepper Snapple Group reportedly fared better, the overall trend has been toward decline. The lesson to take away from this is one that PepsiCo already knows well: the time for soft drink companies to diversify is now. While PepsiCo’s soft drink sales have been in decline, the company’s snack production through Frito-Lay has been on the rise, leading to growth overall (especially in growing markets) and helping the company overcome challenges in tougher segments. Whether diversification is into more health-conscious products or non-CSD brands, branching out has never been more important.