The future of Coke and Pepsi depends on this unlikely beverage
As consumers ditch sugary soda, Pepsi and Coke are looking for a new type of beverage to save their business.
Coca-Cola recently said its "sparkling" sales, including its name-brand soda, remained flat, while PepsiCo said that less than 25% of the company's global sales are now from soda.
This seems to be the perfect time to capitalize on Americans' increasing interest in bottled water — especially since Coke already sells Dasani and Pepsi already sells Aquafina.
Water is one of the hottest beverages in the nonalcoholic-drink market, with consumption of water brands Dasani, Aquafina, and Poland Springs increasing in volume from6.5% to 11.4% in 2015.
Coca-Cola through the years:
For comparison, the amount of Coca-Cola consumed by Americans dropped by 1% by volume, while consumption of Pepsi dropped 3.2%.
When it comes to nutrition, nothing has a better reputation than bottled water. That flawless image fits perfectly into PepsiCo's and Coca-Cola's hopes for a reputation makeover in 2016, after sugar-related concerns drove soda sales down and negative headlines up in 2015.
Indeed, Pepsi and Coke are already benefitting from selling beverages with a healthier reputation than soda.
Coke announced recently that sales of "still" beverages including water and Minute Maid had increased 7%. Its packaged-water volume increased in the double digits in the first quarter of 2016, outpacing increases in other healthier ready-to-drink options, sports drinks (7%), and tea (2%).
"Over the last 15 years, we've gone from stills being a single-digit part of our portfolio to now over 25% of our portfolio," Coca-Cola COO James Quincey said in an earnings call Monday. "We expect to continue to grow faster in stills ... and we'll continue to look for acquisitions to accelerate our growth."
Meanwhile, PepsiCo CEO Indra Nooyi said on Monday nutritious items such as fruits, water, and unsweetened tea also now make up 25% of the company's sales.
Pepsi has "been future-proofing our product portfolio, reshaping it to capitalize on consumers' increasing interest in health and wellness," Nooyi said in an investors' call.
Companies selling bottled water, he argues, have managed to convince Western consumers that buying water is a healthier choice than sugary soda.
According to Jewell, the comparison is a case of false equivalence. Bottled water isn't simply an alternative to soda — it's an alternative to the much more inexpensive and eco-friendly tap water.
"The purchase of bottled water allows us to communicate our uniqueness and the care we have for bodies and the environment," Jewell writes.
This nutrition-minded and independent sense of self is exactly what soda giants like Pepsi and Coke are trying to tap into.
In 2016, the perception of healthiness is often more important for consumers and companies than actual nutritional value. That's why Coca-Cola is investing in products created to fit health trends of the moment, such as Stevia-sweetened Coke Life and Fairlife "premium milk."
Bottled water is a $13 billion business that, logically, doesn't need to exist. It is also an industry that won't stop growing. As Americans turn away from soda, that's exactly the kind of beverage companies like Pepsi and Coke want in their portfolios.
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