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Soda Production in the US\u0003September 2017 1 WWW.IBISWORLD.COM\b Bubble up: Soda producers will refresh product lines to curb falling demand This report was provided to University of Memphis (2127617458) by IBISWorld on 15 November 2017 in accordance with their license agreement with IBISWorld IBISWorld Industry Report 31211a Soda Production in the US September 2017 Chrystalleni Stivaros 2 About this Industry 17 International Trade 34 Revenue Volatility 2 Industry Definition 19 Business Locations 35 Regulation & Policy 2 Main Activities 2 Similar Industries 21 Competitive Landscape 2 Additional Resources 21 Market Share Concentration 37 Key Statistics 21 Key Success Factors 37 Industry Data 21 Cost Structure Benchmarks 37 Annual Change 4 Industry at a Glance 36 Industry Assistance 24 Basis of Competition 37 Key Ratios 5 Industry Performance 25 Barriers to Entry 38 Industry Financial Ratios 5 Executive Summary 26 Industry Globalization 5 Key External Drivers 7 Current Performance 27 Major Companies 9 Industry Outlook 27 The Coca-Cola Company 11 Industry Life Cycle 39 Jargon & Glossary 28 PepsiCo Inc. 29 Dr. Pepper Snapple Group Inc. 13 Products & Markets 30 Monster Beverage Corp. 13 Supply Chain 13 Products & Services 33 Operating Conditions 15 Demand Determinants 33 Capital Intensity 16 Major Markets 34 Technology & Systems www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com Soda Production in the US\u0003September 2017 2 WWW.IBISWORLD.COM\b About this Industry Industry Definition Companies in the Soda Production industry manufacture soft drinks by blending various ingredients with artificially carbonated water. This industry Main Activities The primary activities of this industry are also includes energy beverages. Producers of bottled water, ready-to-drink teas and coffees, as well as juice manufacturers are excluded from this industry. Manufacturing carbonated soft drinks Producing energy drinks Producing sports drinks Brand promotion Research and development The major products and services in this industry are Diet carbonated soft drinks and sparkling water Energy and sports drinks Mixers Regular carbonated soft drinks Similar Industries 31131 Sugar Processing in the US Companies in this industry manufacture raw sugar, liquid sugar and refined sugar from sugarcane, raw cane sugar and sugar beets. 31193 Syrup & Flavoring Production in the US Companies in this industry manufacture flavored syrup drink concentrates and related products for soda fountain use or for manufacturing soft drinks. 31199 Baking Mix & Prepared Food Production in the US Companies in this industry manufacture food, including mixing purchased dried or dehydrated ingredients for foods such as soup mixes and bouillon. 31211b Bottled Water Production in the US Companies in this industry purify and bottle still and carbonated water for resale. 31211c Juice Production in the US Companies in this industry produce still beverages, such as fruit juice, functional beverages or ready-to-drink tea and coffee. Additional Resources For additional information on this industry www.ameribev.org American Beverage Association Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 3 WWW.IBISWORLD.COM\b About this Industry Additional Resources continued www.beverageworld.com Beverage World www.beverage-digest.com Beverage-Digest www.sugarydrinkfacts.org Sugary Drink FACTS \u0003IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to\u0003www.ibisworld.com Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 4 Industry at a Glance Soda Production in 2017 Key Statistics Snapshot Revenue Annual Growth 12-17 Annual Growth 17-22 Profit Exports Businesses $44.6bn -0.4% $3.7bn $1.0bn Healthy eating index Revenue vs. employment growth % change The Coca-Cola Company \u0003 30.8% PepsiCo Inc. \u000329.6% Dr. Pepper Snapple Group Inc. \u0003 9.3% 10 68.0 5 67.5 67.0 0 % Market Share -5 -15 65.5 11 13 Revenue Monster Beverage Corp. \u00036.7% 66.5 66.0 -10 Year 09 -0.9% 273 15 17 19 21 23 65.0 Year 08 10 12 14 16 18 20 22 Employment SOURCE: WWW.IBISWORLD.COM Products and services segmentation (2017) 4.8% Mixers p. 27 19.8% Diet carbonated soft drinks and sparkling water Key External Drivers Healthy eating index Per capita soft drink consumption 51.4% Per capita disposable income Regular carbonated soft drinks Per capita sugar and sweetener consumption 24.0% p. 5 Energy and sports drinks SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM Industry Structure Life Cycle Stage Revenue Volatility Capital Intensity Mature Low Medium Regulation Level Medium Technology Change Medium Barriers to Entry Industry Assistance Low Industry Globalization Concentration Level High Competition Level FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 37 Provided to: University of Memphis (2127617458) | 15 November 2017 High Medium High Soda Production in the US\u0003September 2017 5 WWW.IBISWORLD.COM\b Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary The Soda Production industry produces traditional carbonated soft drinks, energy drinks and various other carbonated flavored beverages. Over the past five years, falling per capita soft drink consumption significantly affected industry performance. Demand for both regular and diet carbonated soft drinks has declined as more consumers turn to healthier beverages to quench their thirst. However, robust growth of energy drink brands kept the industry from completely going flat. Nonetheless, strong media coverage on the adverse effects of sugary beverages ultimately \u0003\u0003Soda producers have introduced new products to mitigate losses burst producers' bubble, causing revenue to decline an estimated 0.9% in 2017 alone. Overall, IBISWorld estimates industry revenue will decline at an annualized rate of 0.4% to $44.6 billion over the five years to 2017. To mitigate the losses from lower consumption, major producers have introduced new soda products. Two of the leading manufacturers, The CocaCola Company and PepsiCo, launched new mid-calorie soda products that appeal to consumers who dislike the taste of diet soda but do not want to consume the calories of regular soda. Furthermore, Key External Drivers Healthy eating index As a growing number of consumers become more health conscious, indicated by a rise in the healthy eating index, demand for regular, calorie-laden soda, energy drinks and sports drinks is expected to decline. Furthermore, consumers have become more aware of the negative health consequences of drinking both regular and diet beverages craft sodas, which promote all-natural ingredients and command premium prices, have risen in popularity over the period. For example, in August 2016, Pepsi's Stubborn craft soda, its third craft soda brand in as many years, became available to consumers in retail outlets. Due to its success, Pepsi continued to add new flavors to these brands through 2017. Strong brand loyalty and new artisanal products allowed producers to keep prices high while input costs fell, raising average industry profit. Coupled with increasing demand for energy drinks, these innovations helped keep revenue from sharply declining over the period. Over the five years to 2022, the industry's soda segment will experience a difficult operating environment, as government campaigns promoting healthier habits cause consumers to purchase less soda, despite improving consumer spending. Even with the introduction of healthier soda made with all-natural ingredients, volume consumption is anticipated to further decline as taxes and bans on soda are implemented at the state and city levels of government. Health concerns are also expected to curb demand for energy drinks, causing this product segment to grow more conservatively than the previous period. In the next five years to 2022, the industry is expected to decline at an annualized rate of 0.9% to $42.6 billion. in recent years. In 2017, the healthy eating index is expected to increase slightly. Per capita soft drink consumption As per capita soft drink consumption declines, demand from downstream markets, such as wholesalers and retailers, will decline, negatively impacting industry revenue. Furthermore, price-based competition Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 6 WWW.IBISWORLD.COM\b Industry Performance intensifies in response to weakened demand, which can negatively affect producers' revenue and profitability. Per capita soft drink consumption is expected to decrease in 2017, posing a potential threat to industry operators. Per capita disposable income While some consumers drink soda, energy drinks and sports drinks regularly, these beverages represent discretionary items for most consumers. Consequently, as disposable income levels rise, consumers are able to continue purchasing industry goods with their other grocery items as well as trade up to craft varieties which carry higher price tags. Per capita disposable income is anticipated to rise in 2017, presenting a potential opportunity for the industry. Per capita sugar and sweetener consumption As per capita sugar and sweetener consumption rises, demand from consumers who consume products with sugar and sweeteners will rise as well, causing an increase in demand from downstream markets, such as retailers. Per capita sugar and sweetener consumption is expected to decrease slightly in 2017. Per capita soft drink consumption Healthy eating index 68.0 45 67.5 40 Gallons 67.0 % Key External Drivers continued 66.5 66.0 30 65.5 65.0 Year 08 35 10 12 14 16 18 20 22 25 Year 08 10 12 14 16 18 20 22 SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 7 WWW.IBISWORLD.COM\b Industry Performance Fizzling sales The Soda Production industry has been negatively affected by growing health concerns and the pervasiveness of diet-related diseases, such as diabetes. Many consumers have begun to substitute soda for healthier beverages, while others have eliminated sugary drinks from their diets altogether. However, strong consumer loyalty to the leading soda brands and the introduction of new products have enabled major producers to maintain market share. Despite declining demand for carbonated soft drinks (CSDs), the growing popularity of energy drinks have helped offset a sharp decline in traditional product sales. Consequently, IBISWorld expects industry revenue to have decreased at an annualized rate of 0.4% to $44.6 billion over the five years to 2017, including a fall of 0.9% in 2017 alone. Demand for CSDs has waned over the past five years, as consumers have become more aware of the negative health effects of drinking soda. In the five years to 2017, per capita soft drink consumption has declined at an annualized rate of 2.8%. The government, media and even soft drink producers themselves have vocalized the consequences of consuming artificially sweetened diet soda and how drinking large volumes of regular soda can lead to obesity. The idea of implementing a tax on soda to curb consumption was first introduced in 1994 and has been enacted in 33 states. National headlines from former Mayor of New York City Michael Bloomberg championing a soda ban prohibiting the sale of sweetened drinks greater than 16.0 ounces in volume in food service establishments throughout New York City instigated the trend over the current period. While this ban was overturned, laws that prohibit the sale of large servings of sugary beverages can significantly dampen demand for soda in such cities and cause other major cities to pass similar regulations. More recently, in November 2016 cities such as Boulder, CO, have voted to impose taxes on sugary beverages; as of July 1, 2017, a two-cent per ounce tax on sodas went into effect in Boulder and a one-cent per ounce tax went into effect in Cook County, IL (which includes Chicago), San Francisco, Oakland, CA and Albany, CA. The government of Seattle also voted to impose a 1.75-cent per ounce tax on sodas effective January 2018. Furthermore, industry products are largely composed of sugar and other sweeteners. Since demand for sugar and sweeteners is driven down by healthawareness trends, demand for sweetened beverages, as well as other industry products, has been volatile over the period. IBISWorld expects per capita sugar and sweetener consumption to rise at an annualized rate of 0.5% over the five years to 2017, which has not been able to offset overall sugary beverage declines. Industry revenue 2 0 % change Current Performance -2 -4 -6 -8 Year 09 11 13 15 17 19 21 23 SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 8 WWW.IBISWORLD.COM\b Industry Performance Competition and innovation Industry structure To counter declining sales of traditional carbonated soft drinks, producers have expanded their low- and zero-calorie offerings. Manufacturers have also diversified their product portfolios to include higher-growth beverages, such as energy drinks, bottled waters and readyto-drink tea, as well as food and snack products. Moreover, the industry has benefited greatly from the robust growth of energy drink sales over the past five years. Due to the relatively nascent stage of this segment, as well as strong demand from younger consumers, revenue from the sale of energy drinks has grown at a double-digit rate over the period. Furthermore, as consumer preferences shift toward healthier and natural products, a new niche of craft sodas has emerged. Craft producers often use all-natural flavoring. In addition, they are able to give off a homemade feel due to their relatively small scale. A 2015 Mintel report on craft sodas revealed that 57.0% of Americans believe soda sweetened naturally is healthier than those made with artificial sweeteners. Major players have jumped on this bandwagon. Over the past three years, PepsiCo has launched as many craft soda brands: Caleb's Kola, 1893 and Stubborn. Caleb's Kola is made with fair-trade sugar cane, natural kola nut extracts and other various spices and citrus, and Stubborn soda (available in fountain form for food service establishments in 2015 and available in bottles for retail sale in 2016) is also made with fair-trade cane sugar and natural ingredients. In 2017, CocaCola debuted Blue Sky Zero Sugar, a craft soda, and Coca-Cola Zero Sugar, for consumers who prefer the taste of traditional sodas but are weary of the added sugars and calories. Over the five years to 2017, per capita disposable income increased at an annualized rate of 1.4%, allowing consumers to trade up to pricier premium beverages. Due to the rapid rise of functional beverages and craft sodas, the number of enterprises has increased at an annualized rate of 2.3% to 273 producers over the five years to 2017. Moreover, these new innovative products require a more skilled workforce for research and development, thus driving wages to grow at an annualized rate of 2.6% to $2.9 billion over the same period. Furthermore, rising demand for functional beverages has driven industry imports to grow at an expected annualized rate of 6.7% to $3.0 billion over the five years to 2017. This is mainly driven by Americans' insatiable demand of Red Bull, which is produced and shipped from Austria and Switzerland. In fact, together, Austria and Switzerland make up 55.0% of industry imports. In the same way, product innovation has driven foreign demand for beverages produced in the United States, causing exports to increase at an expected annualized rate of 1.7% to $1.0 billion over the same period. Due to their proximity and similar preferences, 68.0% of exports go to Canada and Mexico. \u0003\u0003The rise of niche, craft sodas has increased the number of operators Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 9 WWW.IBISWORLD.COM\b Industry Performance Profitability rises This industry is dominated by major players such as The Coca-Cola Company, PepsiCo and Dr. Pepper Snapple Group. These companies consistently have profit margins above 12.0%, with Coca-Cola often gaining profit over 20.0%. Over the past five years, the prices of key inputs have been volatile but ultimately decreased. For instance, the price of corn rose by as much as 10.9% in 2012 and dropped 33.2% in 2014. Similarly, the price of sugar declined 29.2% in 2013 and increased 18.0% the following year. Overall, the price of sugar and corn both decreased at an annualized rate of 0.5% and 13.1%, respectively, over the five years to 2017. Major companies are able to secure long-term contracts that hedge input price fluctuations, but many of the small niche operators were forced to either raise product prices or absorb higher costs. However, many of these niche operators create differentiated specialty sodas which command premium prices. Thus, profit (measured as earnings before interest and taxes) is projected to increase to 8.2% in 2017, up from 8.1% in 2012. Industry Outlook Operators in the Soda Production industry that primarily manufacture carbonated soft drinks are anticipated to struggle to maintain their market share, as consumers continue to turn away from sugary and artificially sweetened beverages. Demand from downstream markets is expected to stagnate as state and local governments push for the passage of additional taxes on soda. Also, growing health consciousness will cause some consumers to drink substitute beverages that are considered healthier than carbonated soft drinks (CSDs), such as fresh juice and bottled water. IBISWorld forecasts industry revenue will decrease at an annualized rate of 0.9% to $42.6 billion over the five years to 2022. Health concerns and product innovation Demand for regular and diet CSDs is anticipated to decline further over the next five years, due to growing health concerns. Per capita soft drink consumption is expected to decline at an annualized rate of 2.5% over the five years to 2022. Many state and local governments will seek different ways to further limit the sale of CSDs in the upcoming years. For instance, more states are expected to implement a soda tax to discourage consumers from drinking soda frequently. For example, a 1.75-cent per ounce tax will go into effect in Seattle in January 2018, with other cities currently debating the topic as well. A significant increase in the price of regular CSDs can lower the sales of regular soft drinks and cause consumers to turn to substitute \u0003\u0003Producers will continue to introduce new products that satisfy consumers' health and nutrition needs beverages such as ready-to-drink tea and coffees. To combat declining demand, producers will continue to introduce new products that satisfy the health and nutrition needs of consumers. In particular, leading companies like The Coca-Cola Company and PepsiCo are expected to create new low- and zerocalorie soda products that are sweetened with only natural sweeteners instead of artificial sweeteners, or a combination of Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 10 WWW.IBISWORLD.COM\b Industry Performance Health concerns and product innovation continued natural and artificial sweeteners. New soda products that are branded as all natural will help boost demand and slow the decline of the overall beverage category. According to Mintel's 2015 study on CSDs, 34.0% of Americans said they would prefer if new soda formulas added benefits such as vitamins, minerals or protein. More importantly, the growing adoption of energy drinks will help lift the industry's performance. Although the growth of this product category is anticipated to decelerate as the market matures and health concerns dampen demand, its growth will more than offset Industry structure Competition in the Soda Production industry will remain intense, driving the industry to consolidate. The number of industry enterprises is forecast to decrease over the next five years at a mild annualized rate of 0.4% to 267 operators. This will push the number of industry employees down at an annualized rate of 0.9% to 49,427 workers. This will also be a result of larger companies buying out smaller niche producers to grow portfolios and maintain market share. Major companies are expected to continue streamlining operations for cost savings; however, the prices of corn and sugar, key ingredients used to produce the decline of both regular and diet soda. Increasing demand for caffeinated soft drinks is also anticipated to boost international trade, driving imports to grow at an annualized rate of 6.7% to $4.1 billion over the forecast period. As the Mexican immigrant population continues to rise, demand for imported CSDs from Mexico will contribute to the growth of imports, increasing competition for domestic producers. Product innovation is also expected to drive foreign demand for industry goods, causing exports to grow at an annualized rate of 4.3% to $1.3 billion in the five years to 2022. \u0003\u0003Larger companies will buy out smaller niche producers to grow portfolios soda, are both anticipated to increase over the five years to 2022. Consequently, average industry profit margins are anticipated to remain at 8.2% in 2022. However, profitability will vary greatly from operator to operator, as energy drink companies tend to be more profitable than soft drink producers. Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 11 WWW.IBISWORLD.COM\b Industry Performance Life Cycle Stage Industry value added is expected to decline in the 10 years to 2022 Declining per capita consumption of CSDs is curbing demand % Growth in share of economy Healthier soda products and alternatives have been introduced recently 20 Maturity Quality Growth Company consolidation; level of economic importance stable High growth in economic importance; weaker companies close down; developed technology and markets 15 Key Features of a Mature Industry Revenue grows at same pace as economy Company numbers stabilize; M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands 10 Quantity Growth Many new companies; minor growth in economic importance; substantial technology change 5 Plastic Bottle Manufacturing 0 Soda Production Soft Drink, Baked Goods & Other Grocery Wholesaling Seasoning, Sauce and Condiment Production Syrup & Flavoring Production Sugar Processing -5 Decline Shrinking economic importance -10 -10 -5 0 5 10 15 20 % Growth in number of establishments SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 12 WWW.IBISWORLD.COM\b Industry Performance Industry Life Cycle \u0003This industry is M \u0003 ature\u0003 The Soda Production industry is in the mature stage of its life cycle. Over the 10 years to 2022, industry value added (IVA), which measures an industry's contribution to the economy, is forecast to decrease at an annualized rate of 0.8%. In comparison, GDP is projected to grow at an annualized rate of 2.0% over the same period. While the industry's energy drink segment continues to grow, these new gains continue to be offset by declining sales of CSDs; these contradictory trends have somewhat canceled each other out, signaling that the industry is squarely within the mature phase of its life cycle. Heightened consumer awareness of the negative health effects of drinking both regular and diet soda (the leading product segments within the industry) has contributed to the decline of demand for industry products. In order to stem falling sales, industry producers have introduced new drinks, including a variety of either zero- or low-calorie products. However, the two distinct product segments in this industry, regular and diet soft drinks, continue to face sales declines. While new, all-natural soda brands, like Coke's Blue Sky, have enticed consumers seeking healthier alternatives, they have not been able to pop the slowdown of the overall CSD category. Conversely, this industry has seen growth from niche craft sodas and functional beverages (energy and sports drinks). In the 10 years to 2022, the number of industry enterprises has grown at an annualized rate of 0.9% indicating growth within a seemingly declining industry. Thus, although the industry has underperformed the economy, growth in producers of niche products and the introduction of brand extensions of existing operators point to the maturity of this industry. Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 13 WWW.IBISWORLD.COM\b Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations Supply Chain KEY BUYING INDUSTRIES 42449 Soft Drink, Baked Goods & Other Grocery Wholesaling in the US Soft drink producers sell their products to wholesalers that then distribute the goods to retailers and food service operators. 44-45 Retail Trade in the US Large chain retail operators possess the purchasing power to buy industry goods directly from manufacturers to resell to downstream consumers. 45421 Vending Machine Operators in the US Soda producers sell their products to vending machine operators for resale to the public. 99 Consumers in the US Many small manufacturers sell soda directly to consumers through their websites or on factory tours. KEY SELLING INDUSTRIES Products & Services 31131 Sugar Processing in the US Sugar processors provide industry operators with sugar, a major raw material used to produce carbonated soft drinks. 31193 Syrup & Flavoring Production in the US Liquid beverage bases, colorings and flavorings are purchased from this industry. 31194 Seasoning, Sauce and Condiment Production in the US Other ingredients used to produce soda, including salt, seasoning and flavoring extracts, are provided by seasoning manufacturers. 32616 Plastic Bottle Manufacturing in the US Soda producers purchase plastic bottles from bottle manufacturers. 32721 Glass Product Manufacturing in the US Glass manufacturers provide industry operators with glass bottles. 33243 Metal Can & Container Manufacturing in the US Metal can and container manufacturers provide soda producers with the cans needed to produce industry goods. Soda produced by industry manufacturers are bottled in cans, glass bottles and plastic bottles in either single-serve or multi-serve container sizes. Manufacturers have added a variety of can and bottle sizes to their product lines, particularly smaller single-serve bottles, to appeal to busy consumers and also those who want to consume less calories. Producers have tried to combat the declining demand for both regular and diet soda by introducing new flavors and brand extensions that are made with natural sweeteners such as stevia. Regular carbonated soft drinks Sodas that are sweetened with sugar, corn syrup and other natural sweeteners are included in this product category. Some of the more popular flavors include mixtures of cola and other flavorings, such as root beer or Dr. Pepper. Citrus sodas are also included, which are various flavored carbonated beverages including lemon-lime, orange and grape flavored sodas. Some of the most popular brands in this category include classic Coca-Cola, Pepsi, Sierra Mist, Sprite, Fanta and Slice. In September 2015, Coca-Cola announced they would be Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 14 WWW.IBISWORLD.COM\b Products & Markets Products & Services continued Products and services segmentation (2017) 19.8% 4.8% Mixers Diet carbonated soft drinks and sparkling water 51.4% Regular carbonated soft drinks 24.0% Energy and sports drinks Total $44.6bn bringing back their Surge brand of citrus sodas (created to compete with Pepsi's Mountain Dew), which was previously discontinued in the early 2000s. Due to growing health-consciousness and the prevalence of health complications, such as diabetes, Americans have become wary of consuming sugary beverages in recent years. Consequently, regular variants of soda have lost share of industry revenue to diet variants since the early 2000s. In 2017, regular carbonated soft drinks (CSDs) are estimated to account for 51.4% of industry revenue. Energy and sports drinks In 2017, energy and sports drinks are anticipated to account for 24.0% of industry revenue. The popularity of functional beverages has exploded in recent years, driven by several factors, including the overall growth of functional food and beverages and targeted marketing. In particular, energy drinks have driven the growth of this segment. Energy drinks first debuted in the US market fairly recently, causing this segment to grow at double-digit rates. While the growth of energy drinks has tapered off over the past five years, demand is still growing and is helping SOURCE: WWW.IBISWORLD.COM drive industry growth. As demand for carbonated soft drinks continues to decline, this segment's share of revenue is anticipated to expand over the next five-year period. Diet carbonated soft drinks and sparkling water Soda that is sweetened with artificial sweeteners, like aspartame, sucralose and stevia, and artificially carbonated waters are included in this product segment. Many consumers choose diet CSDs over regular CSDs because they prefer not to consume the calories in regular soda, whereas some consumers prefer the taste of diet soda. While volume sales of diet CSDs increased in the early 2000s, benefiting from popular diet trends, volume sales have declined in the past five years as consumers have become wary of the health effects of consuming artificial sweeteners. While sales of traditional brands like Diet Coke have declined in recent years, newer products that taste more like regular soda, such as Coke Zero and Coca-Cola Zero Sugar (launched in August 2017), have helped producers maintain market share. Similarly, sales of plain and flavored carbonated water have increased as some consumers turned to zero-calorie Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 15 WWW.IBISWORLD.COM\b Products & Markets Products & Services continued products as a healthier alternative to sweetened soda. Altogether, this segment is expected to account for 19.8% of industry revenue in 2017. Mixers Industry producers also manufacture and market mixers. Mixers are usually carbonated flavored drinks (or unflavored such as tonic water) to be mixed with liquor for cocktails. Mixers can also include juice based carbonated Demand Determinants Demand for industry products depends on a number of factors including price levels, consumers' health concerns and product innovation. Generally, higher prices for soda will place downward pressure on all varieties of carbonated soft drinks (CSDs). Due to the homogeneous nature of soda, when the price of branded products increases at the retail level, many consumers opt for more affordable branded products or trade down to generic brands. However, many soda drinkers are also very brandloyal and will purchase their favorite brand despite higher prices. Additionally, higher per capita disposable income allows consumers to purchase more soda. In the five years to 2017, per capita disposable income has grown at an annualized rate of 1.4%. Furthermore, dining trends can impact demand for industry goods from downstream markets. For instance, as consumers dine out at fast food and full-service restaurants more frequently, demand for soda from food service operators increases. Growing health and nutrition concerns have negatively impacted demand for soda in recent years. Although producers introduced a greater variety of lowcalorie and naturally sweetened soda, Americans still perceive CSDs as unhealthy when compared with bottled beverages, also typically consumed with alcohol. Large beverage producers already have machinery in place to produce these carbonated bases, therefore it is convenient to produce due to economies of scope. Furthermore, as millennials increasingly prefer to mix their own individualized cocktails, this segment has grown in popularity. In 2017, mixers are expected to generate 4.8% of industry revenue. \u0003\u0003Per capita disposable income is increasing, but so is the Healthy Eating Index water, iced tea and a variety of juice beverages. The healthy eating index has increased from 66.7% in 2012 to 66.9% in 2017, showing that Americans have been opting for healthier choices. Producers introduced new bottle sizes in recent years in response to changing lifestyles. Smaller serving sizes appeal to consumers who are wary of consuming calories in liquid form and benefit from the convenience of smaller cans and bottles. Despite the influx of new products, the introduction of new noncarbonated beverages such as bottled iced tea, bottled iced coffee and sparkling fruit drinks has also placed downward pressure on the demand for soda. Marketing is another significant driver of demand for industry goods. In particular, energy drink producers invest a great deal of their revenue to promote their products on college campuses and in major cities. All companies in this industry also partner with popular athletes, musicians and celebrities to send targeted messages to teens and young adults. Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 16 WWW.IBISWORLD.COM\b Products & Markets Major Markets Major market segmentation (2017) 8.2% Other 2.3% Exports 12.7% 41.1% Vending machines Grocery Stores 16.7% Warehouse clubs and supercenters Total $44.6bn 19.0% Gas stations and convenience stores Supermarkets and grocery stores Grocery stores represent the largest single market for soda and functional drink producers. This market segment is a reliable source of sales for soft drink manufacturers and is the most important retail channel for consumers. Households that drink soda regularly purchase soda along with the rest of their groceries, keeping a steady market base. Despite a decline in demand from supermarkets, this market segment's share of industry revenue has remained steady over the five years to 2017, as the demand from other retail channels have declined at a faster rate. In 2017, supermarkets are anticipated to account for 41.1% of revenue. Gas stations and convenience stores Gas stations and convenience stores constitute a key market for soda manufacturers, especially because they are often open 24 hours per day, making them an ideal location for impulse purchases of beverages and snacks. Furthermore, this is the leading point of purchase for energy drinks. This market's share of industry revenue has increased steadily over the past five years due to consumers' growing need for convenience. This segment includes standalone SOURCE: WWW.IBISWORLD.COM convenience stores, as well as stores attached to gas stations and generates about 19.0% of industry revenue. Warehouse clubs and supercenters The next largest market includes warehouse clubs and supercenters which is estimated to account for 16.7% of the soda market in 2017. Carbonated soft drinks (CSDs) have a longer shelf life than other consumable goods, thus, they are ideal to buy in bulk to save money. However, to cut costs, many grocery stores are bypassing wholesalers and purchasing goods directly from producers, hurting this segment. Conversely, major retailers in this channel, such as Walmart, have allocated more space within their stores to food and beverages. Consequently, more consumers have begun to rely on this retail channel to purchase groceries, keeping revenue stable. Vending machine operators Vending machines and individual vendors are convenient outlets for consumers, placed in locations such as rail and bus stations where no alternative vendors exist. Thus, they represent an important market for impulse purchases of soda. This segment is estimated to Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 17 WWW.IBISWORLD.COM\b Products & Markets account for an estimated 12.7% of revenue in 2017. CSD sales from vending machines will likely decline as consumers opt for healthier options like bottled water. Also, soda has been eliminated from most vending machines in public schools due to growing childhood obesity in the United States. Other Other domestic retailers include pharmacies, liquor stores and online retailers. The proliferation of online sales is driving the growth of this segment. In addition, while food service businesses such as fast food and full-service restaurants primarily purchase flavoring International Trade Level & Trend \u0003 xports in the E industry are L\u0003 ow\u0003 and S \u0003 teady\u0003 \u0003Imports in the industry are \u0003Medium\u0003and \u0003Increasing\u0003 Carbonated soft drink and energy drink producers engage in a limited amount of international trade because the value of packaged beverages is low when compared with the cost of transporting and distributing industry goods. However, there is significant international trade of fountain soft drink syrups, which are produced by the Syrup and Flavoring Production industry (IBISWorld report number 31193). Imports Imports of industry goods have increased in recent years. Switzerland, Austria, Mexico and Thailand represent the leading sources of industry imports. Switzerland and Austria remain the leading sources of imports, driven by popular energy drink brands, such as Red Bull. Over the five years to 2017, imports are expected to increase at an annualized rate of 6.7% to $3.0 billion. As demand for imported beverages grows in the upcoming years, imports' share of domestic demand is anticipated to increase. In 2012 imports as a share of domestic demand was 4.6%, which then grew to 6.4% in 2017. Imports are also syrup for soda fountains, a small portion of restaurants also purchase bottled and canned soda from industry operators. While the leading manufacturers operate extensive distribution networks, smaller producers rely on independent distributors to disseminate their products to retail and food service customers. Finally, exports account for a small share of industry revenue because major beverage producers typically license the production of their beverages abroad or they have production plants in countries where the demand for their brands is high. Consequently, exports are expected to represent 2.3% of industry revenue in 2017. Industry trade balance 1500 0 $ million Major Markets continued -1500 -3000 -4500 Year 09 Exports 11 13 Imports 15 17 19 21 23 Balance SOURCE: WWW.IBISWORLD.COM forecast to increase over the next five years as the US dollar continues to appreciate, making foreign goods relatively more affordable. Exports IBISWorld expects the value of exports to reach $1.0 billion in 2017. The major export markets are Canada, Mexico, Taiwan and Vietnam. Canada and Mexico receive 68.0% of industry exports as they are in close proximity to the United Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 18 WWW.IBISWORLD.COM\b Products & Markets International Trade continued States and benefit from favorable trade conditions through the North American Free Trade Agreement. Exports are projected to have grown at an annualized rate of 1.7% over the past five years, with its share of Exports To... revenue having increased from 2.1% in 2012 to a projected 2.3% in 2017. Exports are forecast to increase as a share of revenue as disposable income levels in foreign markets improve over the next five years. Imports From... 7.6% Thailand 3.5% 5.7% Taiwan 4.9% 10.5% 28.8% Switzerland Mexico Vietnam Mexico 23.6% All others 62.3% Canada 26.2% Austria 26.9% All others Year: 2017 Total $1.0bn Total $3.0bn SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA Provided to: University of Memphis (2127617458) | 15 November 2017 SOURCE: USITC Soda Production in the US\u0003September 2017 19 WWW.IBISWORLD.COM\b Products & Markets Business Locations 2017 West New England AK 0.0 Great Lakes WA ND MT 2.7 Rocky Mountains ID OR 1.5 West NV 0.6 1.7 SD 0.2 WY 0.4 MN 0.4 0.8 Plains CO 0.6 KY 0.8 9 OK 1.2 NC 2.7 TN AZ NM 1.9 0.6 Southwest TX 7.6 HI 1.2 Additional States (as marked on map) 1 VT 2 NH 3 MA 4 RI 5 CT 6 NJ 7 DE 8 MD 0.2 1.7 0.2 4.6 1.9 0.2 SC Southeast 0.4 MS AL 0.8 1.2 GA 2.3 0.4 LA 0.4 FL 6.2 Establishments (%) 0.6 1.9 AR 8 0.2 3.1 13.8 7 WV VA 2.5 1.5 2.1 CA West 3.3 MO KS 2.5 OH 1.9 2.9 6 5.0 IN IL 0.6 UT PA 2.1 0.8 0.2 1 2 3 NY 6.0 5 4 MI 2.9 IA NE 0.6 WI ME MidAtlantic 9 DC 0.2 Less than 3% 3% to less than 10% 10% to less than 20% 20% or more SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 20 WWW.IBISWORLD.COM\b Products & Markets Distribution of establishments vs. population 30 20 10 Southwest Southeast Plains New England Rocky Mountains Establishments Mid-Atlantic Great Lakes 0 West The geographic distribution of establishments primarily engaged in manufacturing carbonated soft drinks are aligned with both heavily populated areas and warmer cities. Thus, 21.7% and 19.8% of soft drink manufacturing establishments are located in the Southeast and West regions, respectively. The Southeast has the highest percentage of the population and establishments are spread out fairly evenly throughout this region, with Florida leading with 6.2% of locations. The West is becoming an increasingly popular area for producers because it is close to a large and growing market that benefits from a large Mexican immigrant population. California leads with 13.8% of establishments. Additionally, California is close to East Asia and major export destinations such as Vietnam and Taiwan. The Mid-Atlantic is home to 17.8% of establishments, dominated by the densely populated states of New York (6.0%), Pennsylvania (5.0%) and New Jersey (4.5%). For similar reasons, many manufacturers in this industry are located in the Great Lakes area (13.0%) and most establishments are evenly % Business Locations Population SOURCE: WWW.IBISWORLD.COM spread throughout this region. Furthermore, due to the hot weather and growing population centers, the Southwest holds 11.4% of establishments, most of which are located in Texas (7.6%) where Dr. Pepper Snapple Group is headquartered. All other regions hold less than 10.0% of establishments, respectively. Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 21 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization Market Share Concentration Level \u0003Concentration in this industry is H \u0003 igh\u0003 Key Success Factors \u0003IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: The Soda Production industry exhibits a high level of concentration. IBISWorld estimates that the four largest producers account for a combined 76.4% of industry revenue in 2017. This level has been relatively consistent over the past five years, and it is largely due to the strong brand recognition that the largest players experience. The largest players aggressively market their products, and use celebrity sponsorships to attract consumers. The Coca-Cola Company and PepsiCo alone account for over 60.0% of the industry's revenue. Moreover, according to the US Census Bureau, 50.0% of establishments employ 500 or more people and only 23.7% employ fewer than 10. While small players have attempted to enter the industry, the largest players typically have not experienced any significant threat to their well-established positions. In fact, the leading soda manufacturers have historically purchased regional brands to expand their presence in the market and diversify their product portfolios, which has kept the level of concentration high in this industry. Control of distribution arrangements Establishing expansive and efficient distribution channels is critical in this industry to minimize logistical costs and maximize sales at retail stores. Economies of scope Producing a variety of different packaged beverages enables manufacturers to appeal to a wider consumer group and experience lower production costs. Aggressive marketing - given the high level of competition Due to the high level of competition in this industry, the leading competitors invest heavily in advertising and promotions to drive demand for their products. Ability to manage external contracts Outsourcing noncore functions can reduce costs and enable companies to focus on marketing and innovation. Economies of Scale Operators that produce a greater volume of output benefit from lower production costs, which helps boost profitability. Cost Structure Benchmarks The industry's cost structure is based on estimates for total enterprises. Thus, primary costs such as purchases and wages vary from producer to producer. While changes in demand can significantly impact smaller operators' earnings, multinational companies with greater resources are able to adjust quickly to market conditions. Profit The industry's average profit, defined as earnings before interest and taxes, Production of goods currently favored by the market Successful producers must respond to consumers' growing health concerns and shifting tastes by introducing new products that satisfy their needs. accounts for an estimated 8.2% in 2017, a marginal increase from 8.1% in 2012. While the leading manufacturers enjoy higher earnings than the industry average, regional soft drink and private label producers are much less profitable due to the lower price point of their products. As competition intensified and demand for soda declined over the past five years, many producers were pressured to lower the prices they charge downstream customers while investing in Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 22 Competitive Landscape advertising and promotional campaigns to drive demand for their drinks. However, the price of major inputs, sugar and corn, both decreased at an annualized rate of 0.5% and 13.1%, respectively, over the five years to 2017. Thus, despite increased competition, lower expenses allowed profit to grow (especially as leading producers benefitted from lower costs achieved through consolidation and efficiency gains). Over the next five-year period, profitability is anticipated to stagnate demand for industry products continues to fall and the price of inputs increase. Purchases Although the markup for soda, energy and sports drinks over the cost of raw materials is high, purchases of raw material account for the largest expense for soda producers. Manufacturers purchase ingredients such as carbon dioxide gas, sugar, artificial sweeteners, high fructose corn syrup, caffeine, flavorings and food color. The fluctuating costs of key ingredients caused purchases' share of revenue to increase over the past five years. For instance, the price of sugar experienced double-digit declines in 2012 and 2013 and then increased by 18.0% in 2014. In addition to the ingredients used to make soda, manufacturers purchase aluminum cans and plastic bottles to produce finished goods. Furthermore, as producers extended their brand portfolios by introducing new bottle and can sizes, the cost of purchases increased. Overall, purchases are anticipated to account for 64.2% of industry revenue in 2017. Purchases' share of revenue is expected Sector vs. Industry Costs Average Costs of all Industries in sector (2017) 100 Industry Costs (2017) 7.2 11.8 8.2 6.4 55.8 64.2 n Profit n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other 80 Percentage of revenue Cost Structure Benchmarks continued 60 40 20 2.5 2.2 19.5 0.5 2.1 4.2 13.6 1.3 0 SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 23 Competitive Landscape Cost Structure Benchmarks continued to moderately increase over the next five years as the cost of key inputs rise. Wages Labor costs comprise about 6.4% of revenue in 2017, which represents an increase from 5.6% in 2012. The rise in wage costs can be attributed to producers raising wages as the overall economy recovered. This increase is also due to rising demand for energy drink products; this segment has performed much better than traditional carbonated soft drink (CSD) sales over the past five years. Moreover, as major companies consolidate and most of the production process become automated, fewer low paying jobs are necessary and more high-skilled employees are required for research and development in addition to marketing of new products. Marketing Marketing expenditure is expected to account for 4.2% of industry revenue in 2017. Larger companies with bigger budgets have the ability to spend more than small niche operators on advertisings campaigns. Particularly, due to the high competitive nature of this industry, the largest players are actively trying to maintain brand loyalty by running national campaigns with celebrities. Additionally, operators in this industry rely on marketing to promote brand extensions of new, low-calorie versions of CSDs to entice consumers back to industry products. Other Depreciation comprises about 2.1% of revenue and has been steadily declining over the past five years as small niche operators rely more heavily on labor rather than machinery. Rent and utility costs (including electricity, gas and water expenses) represent 1.3% of revenue. Other expenditures make up the remaining 13.6% of revenue and include legal and administrative costs. Additionally, distribution costs represent a significant and rising proportion of industry revenue, yet companies generally account for this expenditure as a part of selling and administrative expenses. Producers ship their products significant distances to various markets. These activities are done in-house by larger producers but are outsourced by smaller producers, often to this industry's larger competitors who operate extensive distribution networks. Producers also turn to wholesalers and distributors who operate in specific regions and retail channels. This industry is also significantly affected by the activities of upstream beverage syrup and flavoring producers (see IBISWorld report 31193, Syrup and Flavoring Production). Due to the high degree of interdependence between soft drink bottlers and syrup and flavoring producers, the cost structure of this upstream industry has an effect on soft drink producers. In particular, marketing undertaken by syrup and flavoring producers generates brand loyalty among consumers. Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 24 Competitive Landscape Basis of Competition Level & Trend \u0003 ompetition C in this industry is H \u0003 igh\u0003and the trend is S \u0003 teady\u0003 Internal competition Soda producers compete based on a number of factors including price levels, range of products offered, product innovation and marketing. While soda is a low-price item for consumers, it is still a discretionary good and consumption depends on income levels. As demand for industry goods declined due to lower overall consumption levels and growing health concerns, producers temporarily slashed the prices they charged downstream markets to boost demand. Additionally, the growth of private label brands has also intensified price-based competition among manufacturers. While energy drinks are sold at a premium compared to regular carbonated soft drinks, even the leading energy drink producers offered promotions and discounts over the past five years to drive sales. While price levels are important, many consumers are loyal to specific brands and are willing to pay a premium for their brand of choice. The leading soda, energy drink and sports drink producers invest heavily in marketing and promotions to further drive brand loyalty among consumers. Due to shifting consumer tastes and growing health concerns, producers have introduced a variety of brand extensions that are made with healthier sweeteners and contain fewer calories. To capitalize on the growing popularity of natural zerocalorie sweeteners and low-calorie beverages, soda producers have competed to be the first to introduce alternative low-calorie soda beverages in recent years. The range of products that a manufacturer produces is also an important basis of competition. Industry operators produce a variety of soda products in different flavors, container types, container sizes and caloric content. Offering a range of products gives producers a competitive advantage when negotiating with retailers, boosts brand loyalty among consumers and allows producers to tap into new markets and consumer groups. Additionally, wholesalers and large retailers prefer to source a variety of goods from one producer rather than several producers to reduce transaction costs, further incentivizing manufacturers to expand their product portfolios. Finally, industry operators also compete for favorable contracts with downstream customers. While large retailers, such as Walmart and Safeway, possess abundant shelf space to offer a variety of soda brands, smaller downstream markets usually carry a limited number of products. Many convenience stores, vending machines and food service operators limit their soda offerings to one manufacturer. For instance, many vending machines carry only Pepsi or Coca-Cola products, which makes it even more difficult for smaller competitors to obtain contracts with downstream markets. External competition Competition with producers of other ready-to-drink (RTD) beverages has intensified over the five years to 2017. In particular, growth of the Bottled Water industry (IBISWorld report 31211b) and Juice Production industry (IBISWorld report 31211c) have hampered revenue growth for soda producers. Products that are manufactured by juice producers such as sparkling fruit drinks have experienced growth in recent years. While larger manufacturers like PepsiCo and The Coca-Cola Company also produce noncarbonated beverages, the emergence of companies that specialize in these smaller beverage categories continue to threaten the position of the major soda producers. Additionally, external competition has grown as consumers have become more health-conscious, seeking healthier alternatives to soda. Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 25 Competitive Landscape Basis of Competition continued Operators in other beverage industries also compete with soda producers, albeit less directly. People may substitute soda with coffee or tea products, particularly those who seek caffeinated beverages. Furthermore, operators in the Coffee and Snack Shop industry (IBISWorld report 72221b) have enjoyed steady growth in the past decade and are anticipated to expand their operations in the upcoming years. The leading coffee and snack shops, like Starbucks and Dunkin Donuts, have expanded their menu selections to include RTD tea and single-serve coffee pods, which has further intensified competition from this industry. Additionally, the advent of Sodastream, a home carbonation Barriers to Entry There are significant barriers to entry into the Soda Production industry including the high initial capital investments, market saturation, industry concentration and the declining demand for soda. However, as energy drinks are still in the growth stage of its life cycle, there are greater opportunities for new entrants to succeed by entering this niche market segment. Nevertheless, significant capital investments are required to either purchase or lease facilities and acquire expensive machinery and equipment to produce soda. Additionally, new entrants must be able to offer differentiated products that either taste significantly better than the existing products in the market or invest heavily in marketing to position and promote their brand. A high degree of market saturation also acts as a barrier to entry. Not only is the market saturated, but demand for soda is also declining in the United States. While niche producers that target specific regions and consumer groups have appeared in recent years, they have Level & Trend \u0003 arriers to Entry B in this industry are \u0003High\u0003and S \u0003 teady\u0003 product, has also hurt the performance of soda producers. This system allows consumers to turn still water into sparkling water, sparkling juice and soda. Sodastream has appealed to consumers who drink sparkling beverages frequently, providing cost savings as the liquid mixes used with Sodastream cost significantly less than packaged, RTD beverages. However, industry leader, Coca-Cola, recently announced its plan to partner with Keurig manufacturer, Green Mountain, to compete directly with Sodastream. Under this partnership, Green Mountain is set to produce the Keurig Cold system, which will allow consumers to make cold beverages like carbonated soft drinks and sparkling water at home. Barriers to Entry checklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance High High Mature Medium Medium Medium Low SOURCE: WWW.IBISWORLD.COM not been able to obtain significant market share. Furthermore, the three leading soda producers are anticipated to account for over two-thirds of industry revenue in 2017. The popularity of the leading soda brands deters prospective producers from entering this industry because these brands enjoy a high degree of brand loyalty among consumers. Additionally, the leading producers occupy a majority of the shelf space dedicated to soda in grocery stores and supermarkets, making it difficult for smaller producers to obtain contracts with downstream markets. Provided to: University of Memphis (2127617458) | 15 November 2017 WWW.IBISWORLD.COM\b Soda Production in the US\u0003 September 2017 26 Competitive Landscape in this industry is \u0003Medium\u0003and the trend is I\u0003 ncreasing\u0003 International trade is a major determinant of an industry's level of globalization. Exports offer growth opportunities for firms. However there are legal, economic and political risks associated with dealing in foreign countries. Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local firms would otherwise supply. Trade Globalization 200 Going Global: Soda Production 2005-2017 Global Export 150 100 50 0 Local 0 exports are expected to generate 2.3% of industry revenue, while imports are expected to account for 6.4% of domestic demand. US demand for the products of this industry is decreasing as people become more health conscious. This trend may cause domestic producers to look abroad to sell more of their soda products in new markets. Therefore, the level of industry globalization is moderate and is anticipated to grow as producers expand their marketing and distribution networks in developing countries. 200 Export Exports/Revenue Level & Trend \u0003 lobalization G The Soda Production industry has a medium and increasing level of globalization. While international trade is low, the leading soda producers are multinational companies that operate production facilities and distribution networks all over the world. These companies are also rapidly expanding into developing markets as consumer adoption of soda and disposable income levels continue to rise in Asia, Africa and Latin America. The industry, however, has a low level of exports and imports. In 2017, Exports/Revenue Industry Globalization Soda Production Import 40 160 80 120 Imports/Domestic Demand Global 150 100 50 2005 2017 0 Local 0 Import 40 80 120 160 Imports/Domestic Demand SOURCE: WWW.IBISWORLD.COM Provided to: University of Memphis (2127617458) | 15 November 2017 Soda Production in the US\u0003September 2017 27 WWW.IBISWORLD.COM\b Major Companies The Coca-Cola Company | PepsiCo Inc. Dr. Pepper Snapple Group Inc. | Monster Beverage Corp. | Other Companies Major players Monster Beverage Corp. 6.7% (Market share) PepsiCo Inc. 29.6% 23.6% Other Dr. Pepper Snapple Group Inc. 9.3% Player Performance The Coca-Cola Company \u0003Market share: 30.8% \u0003Industry Brand Names\u0003 Coca-Cola Diet Coke Fanta Sprite Coca-Cola Zero Sugar Barq's Cherry Coke Powerade The Coca-Cola Company 30.8% The Coca-Cola Company is the world's largest beverage manufacturing company, with more than 500 brands sold in more than 200 countries. The company was originally founded in 1886 when John S. Pemberton created the world's first flavored carbonated drink. Coca-Cola has seven operating segments: Eurasia and Africa; Europe; Latin America; North America; Pacific; bottling investments; and corporate. Globally, Coca-Cola employs more than 100,000 workers, 51,000 of whom are located in the United States, with global headquarters in Atlanta. Some of the most popular beverage brands produced by the company include Coca-Cola, Fanta and Sprite. Coca-Cola has also acquired a variety of beverage brands over the past five years to diversify its business and reduce its dependence on carbonated soft drinks. Consequently, the industry leader SOURCE: WWW.IBISWORLD.COM reported total global revenue of $41.9 billion in 2016. To combat falling per capita consumption of traditional sodas, Coca-Cola has invested in product reformulations as well as significant merger and acquisition activity. For example, over the current period, CocaCola launched its Coca-Cola Life product, a 60-calorie, 8.0-ounce cola with no artificial sweeteners. The company also created new flavors of its craft Blue Sky brand in June 2017 made with natural sweeteners and flavorings. In August 2017, the company launched Coca-Cola Zero Sugar aimed to maintain the regular soda's taste without all the sugar. This new product is also available in cans as small as 7.5 ounces. These products are expected to help boost ailing sales by capturing consumers who have stopped drinking soda due to health concerns. The Coca-Cola Company (US industry-specific segment) - financial performance* Year Revenue ($ million) (% change) Operating Income ($ million) 2012 2013 14,680.6 3.4 3,295.5 6.4 14,438.9 -1.6 3,151.9 -4.4 2014 14,091.0 -2.4 2,973.9 -5.6 (% change) 2015 14,516.7 3.0 2,860.5 -3.8 2016 13,879.6 -4.4 2,859.9 0.0 2017 13,744.0 -1.0 2,666.3 -6.8 *Estimates Provided to: University of Memphis (2127617458) | 15 November 2017 SOURCE: ANNUAL REPORT AND IBISWORLD Soda Production in the US\u0003September 2017 28 WWW.IBISWORLD.COM\b Major Companies Player Performance continued In recent years, Coca-Cola has also sought to expand its presence into the burgeoning market for new alternative beverages such as energy drinks. In August 2014, Coca-Cola purchased a near 17.0% share of Monster Beverage Corp. for $2.15 billion as a part of this strategy. Under the deal, Coca-Cola will transfer to Monster a number of its products, including NOS, Full Throttle, Burn, Mother and Play. The two companies will share marketing, production and distribution responsibilities. Player Performance PepsiCo Inc. \u0003Market share: 29.6% \u0003Industry Brand Names\u0003 Pepsi Mountain Dew Sierra Mist Mug Root Beer Izze Diet Pepsi Pepsi ONE Gatorade Financial performance In recent years, the company's still beverage category, which is excluded in this industry, has grown. CocaCola's Coke Classic and Fanta brands have performed well, benefiting from zero- and low-calorie brand extensions. However, demand for this division's products has dwindled as a result of decreased soda