Coca-Cola's advertising has often conjured up positive images about drinking soda. Over the years, some of the slogans have included “Enjoy Life,” “Have a Coke and Smile,” and, more recently, polar bears have been drinking Coke, too. In 2013, the Coca-Cola Company decided to promote its non-soda beverages as part of a campaign to fight global obesity. 19 Some products showcased are lower- to no-calorie drinks, which include some diet sodas, juices, and bottled water. As part of its campaign, Coke decided to improve calorie labeling and offer smaller portion sizes. New partnerships were formed as well. Coke partnered with school breakfast programs and ParticipACTION, an active-living organization, to promote a healthier company image and to remind customers to balance taste and calories with exercise. 

M Michael Cohen, professor of marketing at New York University, believes it is a good strategy for Coke. “The pressure comes from the market, consumers are more educated about what they put in their bodies,” he said. “And there’s been a shift toward less sweet tastes.” 21 Critics of the company, such as the Center for Science in the Public Interest (CSPI), a US nonprofit organization focused on promoting health and nutrition, argue that soda drinks have been contributing to obesity in both adults and children. According to CSPI executive director Michael Jacobson, 16% of calories in the average American’s diet are from added sugars, and about half of those calories come from beverages like sugary soda pop. Yale University researchers have similarly found in a study that people tend to eat more calories on days that they also consume sweetened soda drinks. Kelly Brownell, who led the Yale study, argues that the beverage industry is trying to avoid government regulation and new taxes on carbonated soda drinks. “Studies that do not support a relationship between consumption of sugared beverages and health outcomes tend to be conducted by authors supported by the beverage industry,” said Brownell, who supports a soda tax.Today in Canada, almost one-third of children are overweight or obese. Similarly, 60% of men and 44% of women are also overweight. 24 Many nutritionists claim that most sodas have empty calories: lots of sugar and no nutritional content. New York University professor Marion Nestle says there is sufficient proof that sugary pop has contributed to America’s obesity epidemic, especially in young children. Nestle stated that pediatricians who diagnose obese children explain that many of their patients consume 1,000 to 2,000 calories every day from carbonated soft drinks alone. “Some children drink sodas all day long,” she says. “They are getting all of the calories they need in a day from soft drinks, so it’s no wonder they are fat.

The first thing that anyone should do if they are trying to lose weight is to eliminate or cut down on soft drinks.”
25 Certainly, Coke’s strategy has raised some concerns. “It’s part of their broader campaign to reposition the soft drink industry in the public’s mind,” said Jacobson. “When you look at their ads, it's fun and excitement, and happiness, and being hip and modern. But these companies are selling junk food that causes health problems.” According to the CSPI, in the United States obesity costs $147 billion annually, half of which is paid by Medicare and Medicaid. Clearly, health care expenditures could be better spent on unpreventable illnesses; however, curbing obesity is a challenge. In 2013, New York City Mayor Michael Bloomberg attempted to introduce legislation that would have reduced the maximum size of soft drinks sold in delis and other fast-food outlets to 16 ounces. However, the proposed legislation was turned down by a judge in March. Representatives from the soft drink industry argued that obesity is not just caused by soft drinks, but by a wide range of unhealthy food and lifestyle choices. Many industry analysts argue that in the past decade the soft drink industry has begun to change anyways. According to Beverage Digest, a beverage industry publication, the sales of soda declined for the eighth straight year in a row. While soda companies like Coke, Pepsi, and Dr. Pepper have increased prices to help soda revenues, many industry analysts question if this drop in consumption is here to stay. In 2012, soda sales volume decreased by 1.2% to 9.17 billion cases. While the drop may seem small, the reduction in profit dollars is significant. US consumption of soda has been declining since 2005, and last year it fell to its lowest level since 1996. On the other hand, energy drink consumption increased significantly. The monster was up 19.1%, Red Bull was up 17%, and Rockstar was up 8%. T he most popular drink, surprisingly, is water. Bottled water is the fastest-growing product in the beverage industry today, studies suggest. Between 2001 and 2011, bottled water consumption rose 56% to 26 gallons per person. During the same time, annual soda consumption fell by 16%. Due to health concerns over diabetes and obesity, many consumers are turning to healthier products such as juices, coffee, and bottled water to reduce calorie intake and maintain better health. There is a demographic reason for fallen sales as well. Baby boomers (soda’s traditional target market) are now aging, and youth are turning to other beverages instead. 29 Indeed, the soda industry has had to adjust its strategy to ensure continued sales and adequate profit margins. In 2010, Coke and Pepsi spent about $20 billion to acquire their bottling companies in an effort to cut costs and reduce shrinking profit margins. Soda companies have also diversified into other beverages such as sports drinks and fruit juices to counteract lost soda sales. Last year, PepsiCo invested millions of dollars in advertising after losing market share to Coke. Moreover, soda companies are investing heavily in research and development, working on creating zero- to low-calorie natural sweeteners to best mimic the taste of real sugar in sodas. What else are soda companies doing? Well, acquisitions are also growing in number. Writer Mike Esterl explains that their newer drinks are growing in popularity, which is leading to rising profits in this segment. Last year, Coke acquired Zico, a coconut water brand, and diversified into US dairy for the first time, purchasing a small stake in the company that owns Core Power, a workout recovery shake. According to Esterl, “sales of PepsiCo’s Naked juice brand rose about 25% last year and tea and coffee sold through joint ventures with Lipton and Starbucks are posting healthy growth.” “ I think we can all be optimistic about the business we’re in,” said Sandy Douglas, Coke’s global chief customer officer. Currently, the soda market in North America is dominated by Coke, Pepsi, and Dr. Pepper. Coke has 42% of the market, Pepsi has 28%, and Dr. Pepper has 17%. The remaining 13% is held by smaller companies, including no-name and supermarket brands. Certainly, Coke is going to be around for many years to come. Despite lower sales, carbonated soft drinks still make up the largest segment of nonalcoholic drinks in the beverage industry at 25%. For Coca-Cola, 60% of its revenue is derived from soda sales. For PepsiCo, the percentage is lower at around 25%. According to the Wall Street Journal, Coke and Pepsi are drawing about 60% and 50% of sales outside of the United States, and the companies continue to grow globally. After all, Coke is one of the world’s most recognized global brands. In the United States, the company maintains the top brand in the soft drink industry with Coke and Diet Coke retaining the number one and number two spots. For many North American consumers, Coke is more than just a soda—it is a strong part of their culture and history. It’s like the famous 1971 jingle: They’d still “like to buy the world a Coke, and keep it company.”
Questions

1. What stage in the industry life-cycle model is the soft drink industry in? Explain and justify your answer.

2. What strategies are available to the soft drink industry for dealing with declining sales? What would you recommend?

3. Do you think the soft drink industry will die? Why or why not?