MEMORANDUM

th
Date: November 18 , 2016
To: Marisa Michaels
From: Emily Oceretko
Subject: Soda Industry

To assist you with future decisions, I have compiled research and developed a better
understanding of the soft drink industry. This will shed light on the major elements impacting our
business strategies. I have highlighted an overview of products, performance, and significant
factors. Also included is the soda industrys latest news, and future growth.

Overview of Industry Leaders and Products

Per an industry report from IBISWorld, the main segments of the soda industry include:
carbonated beverages, diet soda, sports drinks, flavored waters, and energy drinks. The following
industry leaders have products in each category: Coca-Cola Company (NYSE: KO), Dr. Pepper
Snapple Group Inc. (NYSE: DPS), and PepsiCo Inc. (NYSE: PEP) (Stivaros 2016). The notable
product names from these leaders are Coca-Cola, Coke Zero, Diet Coke, Pepsi, Diet Pepsi, Dr.
Pepper, and Diet Dr. Pepper. Below is a table displaying the various products under each brand.

Notable Brands
Dr. Pepper Snapple
Coca-Cola Co. PepsiCo Inc. Group Inc.
Coke Mountain Dew 7Up
Diet Coke Mug Root Beer Canada Dry
Fanta Pepsi Dr. Pepper
Mr. Pibb Diet Pepsi Schweppes Tonic
Sprite Mist Twist Crush
Coke Zero AMP Energy A&W Root Beer
Sprite Zero Aquafina Deja Blue Water
Mello Yello Frito-Lay Hawaiian Punch
FullThrottle Gatorade IBC Root Beer
Barq's Root
Beer Quaker Oats Mott's
Dasani Water Tropicana Orangina
SmartWater Doritos Snapple
Fuze Lipton Tea Squirt
Odwalla Cheetos Sun Drop
Starbucks
Simply Orange (Partner) Sunkist
Minute Maid YooHoo
Vitamin Water
 Sources: www.drpeppersnapplegroup.com/brands/,
www.coca-colacompany.com/brands/the-coca-cola-company,
www.pepsico.com/Brands/BrandExplorer#top-global-brands

Key Factors and Performance

Overall, the industry records approximately $3.7 billion in profit, $1 billion in exports, and 253
businesses. The interest in soft drinks shows a negative rate of growth annually, as well as a
projected negative growth rate. Companies can put a hold on further declining profits with long
term contracts. The main factors driving performance for the soda industry include the per capita
soft drink consumption, healthy eating index, price of sugar, and disposable income of
consumers (Stivaros 2016). Per the Industry Market Research for Vending Machine Operators in
IBISWorld (2016), the industry revenue has been declining each year since 2005 due to the
decline in per capita soft drink consumption and a transition to a higher healthy eating index. The
rising disposable income and decline in sugar and corn prices led to a slowed rate of decreasing
revenue for the industry. With this, the revenue for the soda industry is projected to decline at
slower rates as consumers are given new product options that adapt to recent industry changes.
Themes
The decreasing popularity in sugary beverages led the expansion of industry leaders into the food
business. PepsiCo Inc. moved to food service by acquiring Pizza Hut, Taco Bell, and Kentucky
Fried Chicken (Encyclopedia of American Industries 2016). The addition of food to the brand
lineup will alleviate the growing changes in consumers towards soda products. Coca-Cola Co.
remains a beverage-only company, as their drink brands are most present in segments of the
market in contrast to PepsiCo Inc. and Dr. Pepper Snapple Group Inc.

Schools across the nation began to ban fizzy drinks in the early 2000s (Wallace 2002). The
decline of consumption has led to healthier alternatives. There is a growing awareness of how
sugary drinks affect childrens health and how they can lead to diabetes and heart disease. This
strongly affects the soda industry by putting more weight on bottled water products, tea, and
sports drinks. These themes provoke new trends such as eliminating chemicals and introducing
natural, healthier choices.

Latest News and Global Industry Trends

The latest news for the soda industry, according to a Fortune.com article, remains whether soda
will be taxed further in cities across the country. The previous mayor of New York City, Michael
Bloomberg, is backing efforts to raise awareness of the negative effects of soda. In cities, such as
Philadelphia and San Francisco, Bloomberg has donated money to support campaigns for the
taxation and decreased consumption of sugary beverages (Kell 2016).

As an answer to consumers desire for healthier options, craft sodas made with natural sugars and
lowered caloric levels are growing in popularity among major beverage companies. PepsiCo Inc.
released PepsiTrue, a sugar and stevia enhanced drink with 30% less calories than their original
Pepsi soda (Gondo 2014). These efforts are made by soda manufacturers to increase profitability
as levels have been at a constant decline over recent years.

Stated in an article in the Publicans Morning Advertiser from the U.K., soda is no longer viewed
as an embarrassing order at pubs and bars. Soft drinks, especially with increase in the craft soda
presence, are growing more popular to order with younger generations. Different ages bring
different tastes, such as Dr. Pepper Snapples Schweppes Tonic Water for older customers
(Robinson 2016).

Summary
This overview of the soda industrys key factors, performance, growth, and future trends will aid
in decisions to come. As the popularity of soda was at a decline in recent years, alternatives are
welcomed and balancing the performance of the industry. With product innovations and a change
in consumer taste, the soda industry is bound to evolve further. Please contact me with any
questions you may have at eoceretko@email.arizona.edu.

References

Bottled and Canned Soft Drinks and Carbonated Waters. (2016). Encyclopedia of American
Industries. Retrieved November 10th, 2016 from Gale (Business Insights: Essentials).

Gondo, N. (2014). Pepsi Taps Trend with Craft Soda. Investors Business Daily, 10612890.
Retrieved from Business Source Complete, EbscoHost, November 27th, 2016.

Kell, J. (2016). Michael Bloomberg Drops $18M for His Crusade Against Sugary Sodas.
Fortune.com, 1. Retrieved November 10th, 2016 from EbscoHost.

Robinson, N. (2016). Soft drinks are not a hard sell. Publicans Morning Advertiser, (9), 28-29.
Retrieved November 10th, 2016 from EbscoHost.

Stivaros, C. (2016). Soda Production in the United States (Industry Report 31211a). Retrieved
November 10th, 2016 from IBISWorld database.

Vending Machine Operators in the US. (2016). Industry Market Research, #45421. Retrieved
November 27, 2016, from IBISWorld.

Wallace, R. (2002) Worried Schools Ban Soft Drinks. The Mirror, 23. Retrieved November 27th,
2016 from LexisNexis Academic.