The Coca-Cola Company (KO): What Will “Kickstart” do for PepsiCo, Inc. (PEP)?

Have you tasted the new Kickstart? Tell me honestly, despite those secret adventure streaks that you have in you did it really appeal to you enough to make you forget your morning cup of coffee or your glass of orange juice? My apologies if it did because the new Kickstart did not pep up my morning for sure.

In fact, it looks to me as quite an ordinary attempt on PepsiCo, Inc. (NYSE:PEP)’s part to add another brand in the energy drinks segment. It’s no secret that PepsiCo, Inc. (NYSE:PEP) has been losing share in the beverages segment. The company has been devising various strategies to counter its falling cola sales. Let us see where PepsiCo stands with this latest offering.

It’s true that soda sales are falling and the latest Beverage Digest industry newsletter does corroborate that fact amply. The carbonated beverage industry experienced its third-consecutive year of declines in 2012 and the pace of decline is fast increasing.

In 2010, there was a drop of 0.5%, in 2011 it doubled to 1% while 2012 saw a decline of 1.2% and a steeper 1.7% if you leave out energy drinks. So the soda market is contracting and both The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) are looking to diversify into new businesses.

PepsiCo has an upper hand in this regard on account of its thriving snack-foods business, which contributes almost equally to the top line as the beverages. The Coca-Cola Company (NYSE:KO), on the other hand, is almost a pure beverage play.

Now both these companies are trying to make it big in alternate beverage sectors like bottled water, juices, packaged tea and energy drinks. They have several solid brands in the non-carbonated beverages like PepsiCo, Inc. (NYSE:PEP)’s Tropicana and Gatorade and The Coca-Cola Company (NYSE:KO)’s Minute Maid. The latter has recently acquired European juice company Innocent to increase its exposure in this segment.

Of the non-carbonated beverages, however, energy-drinks are growing most rapidly. Analysts estimate that the energy-drink segment will grow as much as 86% over the coming five years and take on a size of almost $12 billion in the US.

The market is dominated by Red Bull and Monster Beverage Corp (NASDAQ:MNST). In 2012, the former sold over 5 billion cans of energy drinks in 165 countries while the latter sold over 2 billion cans in around 90 countries. According to the industry newsletter Beverage Digest, Monster and Red Bull were the fastest-growing brands in the non-carbonated beverages segment in 2012 and the duo has witnessed volume growth of 19.1% and 17%, respectively.

PepsiCo currently has a mere 3% share in the energy drinks market through its Amp brand drinks. The Coca-Cola Company (NYSE:KO) is even further behind, with a share of just about 1.3% through its drinks such as Nos, Full Trottle, etc.

Current statistics show that although the U.S. energy drink market is expanding, performance stemming from the soda giants is quite disappointing. As per the Nielsen reports for the 12-week period ended Feb. 16, sales of energy drinks in dollar terms increased 5.7%. Sales of Amp during this period, however, declined 17.6%. Sales of Full Throttle were also on the decline, falling 2.3%, although The Coca-Cola Company (NYSE:KO)’s NOS brand increased 11.7%.