Carbonated Soft Drinks - US - April 2017


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Mintel

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The CSD (carbonated soft drink) market continued to struggle from 2015-16, with sales falling and effective stagnation forecast through 2021. While the vast majority of consumers use CSDs, the mature market is struggling to grow as users seeking more-healthful options cut back and turn instead to BFY (better for you) beverages, as well as coffee, tea, and hybrid drinks. Strong brand recognition is key to growth as is engagement with iGeneration, Millennials, parents, and Hispanics through proactive outreach and product innovation.

Table of Content

OVERVIEW
What you need to know
Definition

EXECUTIVE SUMMARY
Sales fall in 2016 and little growth forecast through 2021
Figure 1: Total US sales and fan chart forecast of carbonated soft drinks, at current prices, 2011-21
The issues
CSD users often also enjoy BFY drinks, and report increasing BFY consumption
Figure 2: Consumption of carbonated drinks, by amount compared to a year ago, December 2016
BFY drinks, concerns with sugar and additives drive down CSD usage
Figure 3: Top reasons for CSD attrition, December 2016
The opportunities
Younger generations, parents, Hispanics show robust category engagement
Figure 4: Any or more consumption of carbonated soft drinks compared to a year ago, for iGeneration, Millennials, parents, and Hispanics, December 2016
Hispanic Millennials stand out as very active in the CSD market
Figure 5: Any or more consumption of select carbonated soft drinks compared to a year ago, for Millennials, by Hispanic origin, December 2016
Consumer interest in category innovation is high
Figure 6: Carbonated soft drink innovation, for iGeneration, Millennials, parents, and Hispanics, December 2016
Beverage blurring creates opportunity, potential competition, and confusion
What it means

THE MARKET – WHAT YOU NEED TO KNOW
Consumer preference for BFY drinks dampens CSD market growth
Regular carbonated soft drinks are the largest, most stable segment
Obesity rates, sugar taxes and BFY drinks compound challenges
Positive market factors include high penetration and demographic trends

MARKET SIZE AND FORECAST
Growth dips in 2016 and forecast shows flat sales through 2021
Figure 7: Total US sales and fan chart forecast of carbonated soft drinks, at current prices, 2011-21
Figure 8: Total US retail sales and forecast of carbonated soft drinks, at current prices, 2011-21

MARKET BREAKDOWN
Regular soft drinks are the largest, fastest-growing segment
Figure 9: Market share of carbonated soft drinks, 2016
Figure 10: Total US retail sales of carbonated soft drinks, by segment, at current prices, 2014 and 2016
Modest growth projected for regular CSD segment through 2021
Figure 11: Total US retail sales and forecast of carbonated soft drinks by segment, at current prices, 2016
Drug stores and “other” retail channels grow share from 2014-16
Figure 12: Total US retail sales of carbonated soft drinks, by channel, at current prices, 2014 and 2016

MARKET PERSPECTIVE
Bottled water market soars, reflecting consumer quest for BFY drinks
Figure 13: Total US retail sales and forecast of bottled water, at current prices, 2011-16
Sparkling water and CSDs – Not necessarily an either/or proposition
Figure 14: Consumption of CSDs and sparkling water, compared to a year ago, December 2016
Juices, coffee, and tea compete with CSDs
Hybrid drinks offer opportunity, plus competition and potential confusion

MARKET FACTORS
Obesity epidemic creates challenging landscape for CSDs
Macroeconomic factors shape household budgets and CSD choices
Figure 15: Consumption of CSDs compared to a year ago, by household income, December 2016
Figure 16: Consumer confidence and unemployment, 2000-September 2016
Engagement among iGeneration and Millennials is key to growth
Figure 17: Any or more consumption of select CSDs compared to a year ago, by generation, December 2016
Figure 18: US population aged 18+, by generation, 2012-22
Diverse young consumers and parents key to market
Figure 19: Population by race and Hispanic origin, 2012-22
Figure 20: Hispanic share of population, by generation, 2017
Figure 21: Any, more, or less consumption of CSDs compared to a year ago, for Hispanics and Hispanic Millennials, December 2016

KEY PLAYERS – WHAT YOU NEED TO KNOW
Only one of the three largest suppliers grew MULO sales in 2016
Category leaders pull out stops, still struggle
Diet struggles as consumers turn to BFY alternatives
Private label sales fall, while niche suppliers grow via innovations

MANUFACTURER SALES OF CARBONATED SOFT DRINKS
The three largest players command over 90% of MULO sales
Private label sales fall, as small suppliers build share from modest base
Figure 22: Manufacturer sales of carbonated soft drinks, by leading companies, 2015 and 2016

WHAT’S WORKING?
On-point, diverse marketing strategies support lead position
Aspirational qualities: themes of play, connection, and romance
Figure 23: Coke subway TV ad, March 2017
Figure 24: Coke elevator TV ad, March 2017
Sponsorship of sports events and celebration of community
Figure 25: Coke March Madness and work ad, March 2017
Pairing food and soda
Figure 26: Coke “Love Story” ad, September 2016
Figure 27: Coke “Moments Made Yummier” video, September 2016
Seasonal promotions: tradition, nostalgia, and family
Figure 28: Coke 2016 Christmas ad, December 2016
Sprite and Fanta, with fruit-flavored CSDs and playful, hip campaigns
Sprite rolls out special editions, benefits from LeBron James endorsements
Figure 29: Sprite’s LeBron James and Lil Yachty ad, February 2017
Fanta ads showcase fruit-flavored CSDs spurring social, fun, playful dance numbers
Figure 30: Fanta Bring the Bold to the movie theater, July 2016
Dr Pepper Company, with growth in Dr Pepper and Canada Dry
Quirky ads for unique cravings for Dr Pepper
Figure 31: Crave Rider ad for Dr Pepper, March 2017
An emphasis on relaxation and natural ingredients from Canada Dry
Figure 32: Canada Dry, The Root of Relaxation, May 2016
Figure 33: Canada Dry, Relax Harder, January 2016
Brands known in Latin America, craftier, retro feel grow base

WHAT’S STRUGGLING?
Diet sodas continue to struggle, with few bright spots
PepsiCo – while still a leading supplier – sees continued loss of share
Figure 34: Pepsi Max, We Know How Much It Means, March 2017
Figure 35: Pepsi Uncle Drew clip, March 2017

WHAT’S NEXT?
Natural ingredients, “free from” drinks and more varied, original flavors
More sophisticated sodas, including those designed for food pairing
Sodas with natural caffeine, health benefits, and a hybrid nature

THE CONSUMER – WHAT YOU NEED TO KNOW
CSD usage is high, though many also enjoy other carbonated drinks
iGeneration and Millennials among strongly engaged CSD users
Increasing BFY drinks and cutting back sugar propel CSD cutbacks
Younger users cut CSD usage to try new flavors, formulations
CSDs are especially popular with meals, in restaurant deals
“Healthy” and “all natural” innovation most widely sought

CONSUMPTION OF CARBONATED SOFT DRINKS
Vast majority of those surveyed enjoy a range of CSDs
Figure 36: Consumption of carbonated drinks, compared to a year ago, December 2016
While penetration is high, more are cutting back than increasing usage
Figure 37: Consumption of CSDs compared to a year ago, by type of CSD, December 2016
iGeneration and Millennials stand out as key CSD consumers
Figure 38: Consumption of carbonated drinks compared to a year ago, by generation, December 2016
Many younger consumers drinking more CSDs, as older users cut back
Figure 39: Consumption of carbonated drinks compared to a year ago, by generation, December 2016
Figure 40: Consumption of CSDs compared to a year ago, by generation and type of CSD, December 2016
More-affluent HHs show preference for low-calorie, natural CSDs
Figure 41: Consumption of CSDs compared to a year ago, for household income, December 2016
Parents consume a wider range of CSDs
Figure 42: Consumption of carbonated drinks compared to a year ago, by parental status, December 2016
Figure 43: Consumption of CSDs compared to a year ago, by parental status and type of CSD, calorie content, December 2016
Figure 44: Consumption of CSDs compared to a year ago, by parental status and type of CSD, December 2016
Hispanics – and especially Hispanic Millennials – key to future growth
Figure 45: Consumption of carbonated drinks compared to a year ago, by Hispanic origin and Millennial generation, December 2016
Figure 46: Consumption of CSDs compared to a year ago, for Hispanic Millennials, Part I, December 2016
Figure 47: Consumption of CSDs compared to a year ago, for Hispanic Millennials, Part II, December 2016

REASONS FOR ATTRITION
Healthful alternatives and sugar concerns are core reasons for attrition
Figure 48: Reasons for attrition, December 2016
A quest for new drinks, flavors propels iGeneration users to cut back
Figure 49: Reasons for attrition, by generation, December 2016
Healthful, low-sugar options luring upper-income CSD users
Figure 50: Reasons for attrition, by household income, December 2016
Hispanics, while concerned with CSD sugar, also want variety and flavor
Figure 51: Reasons for attrition, by Hispanic origin, December 2016

REPLACEMENT BEVERAGES
Water is top replacement beverage, followed by tea, juice, and coffee
Figure 52: Replacement beverages, December 2016
Millennials replace CSDs with wide range of alternatives
Figure 53: Replacement beverages, by generation, December 2016
When seeking CSD alternatives, Parents embrace a wide variety
Figure 54: Replacement beverages, by parental status, December 2016
Hispanics often drink more water to cut back on sugar and caffeine
Figure 55: Replacement beverages, by Hispanic origin and Millennials, December 2016

CONSUMPTION OCCASION
CSDs are popular meals, but also associated with snacks and gatherings
Figure 56: Occasion for carbonated soft drink consumption, December 2016
Younger users enjoy CSDs at meals, Millennials exhibit broader usage
Figure 57: Occasion for carbonated soft drink consumption, by generation, December 2016
Parents often enjoy CSDs at meals – and throughout the day
Figure 58: Occasion for carbonated soft drink consumption, by parental status, December 2016
Hispanics – especially Millennials – consume CSDs on many occasions
Figure 59: Occasion for carbonated soft drink consumption, by Hispanic origin and for Millennials, December 2016

ATTITUDES TOWARD CARBONATED SOFT DRINKS
Opportunities lie in capitalizing on regular meals, growing daily usage
Figure 60: Attitudes toward carbonated soft drinks, December 2016
Foodservice deals may be key to rolling out CSDs to iGeneration
Figure 61: Attitudes toward carbonated soft drinks, by generation, December 2016
Parents keep on hand for guests and special occasions
Figure 62: Attitudes toward carbonated soft drinks, by parental status, December 2016
Hispanics likely to enjoy CSDs at many occasions, as well as beyond home
Figure 63: Attitudes toward carbonated soft drinks, by Hispanic origin, December 2016

CARBONATED SOFT DRINK INNOVATION
“Healthy options” are a priority, but consumers eager for other benefits
Figure 64: Carbonated soft drink innovation, December 2016
Younger consumers show the high interest in innovations
Figure 65: Carbonated soft drink innovation, by generation, December 2016
Parents also very open to added benefits and supplements
Figure 66: Carbonated soft drink innovation, by parental status, December 2016
Hispanics seek CSDs with greater range of benefits
Figure 67: Carbonated soft drink innovation, by Hispanic origin and for Millennials, December 2016

APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Fan chart forecast
Consumer survey data
Direct marketing creative
Abbreviations

APPENDIX – MARKET
Figure 68: Total US sales and forecast of carbonated soft drinks, at inflation-adjusted prices, 2011-21
Figure 69: Total US sales and forecast of regular soft drinks, at inflation-adjusted prices, 2011-21
Figure 70: Total US sales and forecast of diet soft drinks, at inflation-adjusted prices, 2011-21
Figure 71: Total US retail sales of carbonated soft drinks, by retail channel, at current prices, 2010-20
Figure 72: Average household size, by race and Hispanic origin, 2016
Figure 73: Distribution of generations, by race and Hispanic origin, 2017
Figure 74: Median household income, by race and Hispanic origin of householder, 2015

APPENDIX – KEY PLAYERS
Figure 75: MULO sales of regular soft drinks by leading companies and brands, rolling 52 weeks 2015 and 2016
Figure 76: MULO sales of diet soft drinks by leading companies and brands, rolling 52 weeks 2015 and 2016

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