The Atlanta, GA based company’s earnings rose 13% in the quarter. Global sales gained a flat 3%, the lowest quarterly increase of 2012. But executives at the company shrugged off the slowdown. CFO Gary Fayard said on the earnings call, “It happened, but it’s not the start of a trend.”
But there is unquestionably a trend emerging in the soda industry. Sales of soft-drinks, like cola, are on the decline. Changing tastes and health concerns are chief factors for waning “pop” sales.
The iconic red Coca-Cola cans are not as welcome as they once were in a bevy of places. Schools are removing sugary soft drinks from vending machines at a quick clip, and local government offices are increasingly moving to remove them from public facilities as concerns about obesity and its costs to the nation mount.
U.S. consumption of soda has progressively dipped over the last eight years. Coke, along with the other beverage heavyweights PepsiCo, Inc. (NYSE:PEP) and Dr. Pepper Snapple Group Inc. (DPS), have offset the decline even amid rising commodities by boosting prices, which soda aficionados gladly pay for.
But the steady and accelerating decline (down 0.6% in 2012) has the trio relying more on their bottled water and non-fizzy drinks. Something Coke has plenty of.
In fact, the cola king has more than 500 brands in its cache of products, so it is well diversified. About 60% of Coke’s revenue in the U.S. comes from carbonated beverages. But as palates change, Coke is poised to pounce on any shift.
No. 2 player Pepsi derives about a quarter from the fizzy stuff, while No. 3 Dr. Pepper Snapple is the most reliant on soda at 90%. But unlike its peers, Dr. Pepper sells very little cola, which has been the biggest drag on Coke and Pepsi.
Despite the declines, soda accounts for nearly 25% of the $20.78 billion plus U.S. beverage market. Furthermore, soda devotees are a loyal bunch—some may even say they are addicted to the stuff. That kind of devoted following is exactly what has activists like NYC Mayor Michael Bloomberg moving to have super-sized, calorie laden Big Gulps and the like banned.
