These are hard times for the carbonated soft drink business. Once Americans' drink of choice, sodas now face stiff competition from other beverages, chiefly water and energy drinks.
Soft-drink makers are fighting back with new package sizes, configurations and designs. Can they reverse soda's bad fortunes, though?
Package design is getting a makeover. Pepsi One's package now sports black and silver graphics, and in September, Coca-Cola will relaunch a modern look for its fruit-flavored Fresca.
Bottle and package sizes also are under review. Beverages are now available in 8-ounce as well as 12-ounce sizes. Shoppers can choose from packages with varied counts of bottles or cans.
The shift reflects a recognition by CSD makers, and, for that matter, other packaged-goods makers, that the one-size-fits-all approach no longer works.
Today's consumers demand different-sized products depending on who they are and their need at a given moment, said Gary Hemphill, managing director of the Beverage Marketing Corp., a New York-based consulting firm. Someone may want a smaller bottle to stow in a gym bag, for example, but grab a larger bottle for a picnic on a hot day.
In line with a broader food industry trend, soda makers are also decreasing product sizes of various products. Manufacturers are "fighting the war on obesity by shrinking package and serving sizes," said Tom Vierhile, executive editor of Datamonitor's Productscan Online. "In addition, fast growth in single-person households and the rise of on-the-go consumption is helping stoke demand for portioned packaging."
Functional beverages also are driving the trend toward smaller bottles, said Darrell Jursa, managing partner of Chicago-based beverage consulting firm Liquid Intelligence. With these fortified beverages, manufacturers are meeting the demand of consumers who want nutrients but fewer calories.
Consumers have embraced smaller package sizes in other categories.
"Yogurt manufacturers went to smaller sizes, and I thought people would be annoyed, but they weren't," said Don Montuori, editor, Packaged Facts market research report, New York. "Smaller sodas may have appeal to parents who want to give their kids less. They may not want them to have soda in the first place, but this is a way to control it."
Buying drinks in smaller sizes is a way for consumers to treat themselves without feeling guilty, Jursa said. "It acknowledges that people may not want 24 ounces of liquid."
Variety in bottle and multi-pack sizes is lifting sales of national brand soft drinks at K-VA-T in Abingdon, Va., said Rick Kelly, category manager of beverages and salty snacks for K-VA-T, which operates the Food City banner.
Soda makers are trying to grow sales by increasing customer loyalty to 12-, 16.9- and 24-ounce sizes, given that the customer looking for a 12-ounce soda is a different person than the customer looking for the 24-ounce, he said.
"These different sizes usually come in different counts, so even though there's a considerable amount of cannibalization, there's probably been enough different sizes introduced to grow sales," he said.
Kelly is running special displays through Coke and Pepsi bottlers and giving more CSD display space to diet brands and diverse package configurations. He's merchandising them on end displays near the soft-drink aisle as well as at the heavily trafficked area at the front of stores. CSDs are cross merchandised with salty snacks, pizza and the like.
It's unclear if tweaking package size will revive consumer interest in the category, though.
The variety in sizes gives people more options to choose from, which never hurts, said Mary Gaiche, store manager at Crossroads County Market, a single-store operation in Wausau, Wis.
The new bottle sizes could help by expanding the number of soda-drinking occasions, agreed Jim Hertel, senior vice president, Willard Bishop Consulting, Barrington, Ill. "It expands consumption relative to what's appropriate for a younger kid or an older person. The emphasis now is on immediate consumption rather than delayed, so there's an increase in single-serve sizes."
Fridge packs are an improvement over traditional packs that didn't make the best use of refrigerator space, Hertel said. Manufacturers "have created a consumer preference for this kind of packaging," he said. "It also has a beneficial impact on consumption because people want their soda cold. It's better for the supermarket shelves, too."
The impact of smaller soda can sizes is debated, though. Montuori thought 8-ounce cans might encourage repeat consumption, while Hemphill said he believed the smaller sizes answered an occasion rather than a portion-control need.
What packaging doesn't address is the cause of soft CSD sales: Health and wellness awareness is causing consumers to reject beverages that offer no nutritional benefits.
Diet outsells regular soda by a 60-40 margin at Crossroads County Market. "In the last three years we've seen the trend move over towards diet with all the press about obesity," Gaiche said. "It tends to be adults who buy diet products, but it's trending down to 18. People are starting to worry about their weight younger."
At K-VA-T, too, it's diet soda that's fueling growth. "Full-calorie still sells best, but diets are quickly gaining," said Kelly.
That consumer demand is fueling the other new-product trend: diet beverages.
Although per capita consumption of soft drinks declined last year for the sixth year in a row, Pepsi-Cola saw sales growth of 0.4%, fueled by Diet Mountain Dew, which was up 15.3% in 2003, and Diet Pepsi, whose sales grew 6.7% in 2004, according to Beverage Marketing. New, non-diet products boosted sales initially but did not maintain them. Coca-Cola's sales volume, meanwhile, dropped 0.7%, with sales of regular Coke dipping 3.2% but Diet Coke and Diet Sprite both increasing 5%.
The summer crop of new diet drinks includes Coke Zero, Diet Coke with Splenda, 7-Up with Splenda, and two new zero-calorie additions to Coca-Cola's Fresca line. Pepsi-Cola is introducing reformulated Pepsi One with Splenda, as well as Tropicana Twister Sodas in three flavors, plus one diet.
The launch of Coke's new products brings the number of its diet offerings to 40 out of the company portfolio of 200 brands -- an increase over 1986 when Coca-Cola had 40 brands, seven of them diet. Now, one-third of Coke's soft drink business is diet.
"There are a lot of innovations," Hertel said. "Diet Coke with lime has rippled through: first regular, then diet and then Pepsi followed suit. Vanilla took a similar trajectory through the category. The trick, especially from retailers' point of view, is to make sure it's a consumer-focused innovation and not just innovation for innovation's sake."