Memorandum

To: Marisa Michaels

From: Nathan Whetherhult
Subject: Soft Drink Industry Report
Date: December 9, 2016

Per request, I have created an industry overview containing the various

components of the soft drink industry. The analysis will give you an insight of
the industry and its significant factors that account for its everlasting
presence in the market. Below, the memorandum contains information
regarding the leading players, themes in both domestic and international
markets, target demographics, noteworthy trends, and products of the soda
industry.
Leading Companies
There are four major leaders in the soft drink industry. As reported by
Passport, Coca-Cola, PepsiCo Inc., Nestl, and Dr. Pepper Snapple Group Inc.
exceed other companies in regards to trade with food retailers and
supermarkets. Out of the top four companies, Coca-Cola has remained
dominant by accounting for 21.96% of off-trade soft drink volume in the
United States on average in the past five years.

NBO Company Shares of Off-trade Soft Drinks (as sold): % Volume 2011-2015

Source :
http://www.library.arizona.edu/applications/quickHelp/tutorial/euromonitordbforbnad
Themes
Domestic
The soda industry has faced adversity regarding U.S. matters for the past ten
years. Per IBIS Industry Outlook, as an increasing number of consumers in
the U.S. market since 2006 are becoming more health conscious, soft drink
consumption has significantly decreased as a result (Stivaros, 2016). Since
consumers are becoming more aware of the health side effects of drinking
soda, soft drink companies have started, and continue, to pursue innovation
and focus on non-carbonated products in their lines.

International
From a global prospective, the soft drink industry is steadily growing in
volume. Since soda consumption is declining, there appears to be an upsurge
in other soft drink products. For instance, drinks like RTD tea and coffee
products are responsible for keeping soft drink companies afloat in
popularity. Reported by Euro Monitor International, RTD tea is becoming a
favorable drink globally. Its rise of popularity is distinctly conveyed in Asia;
where the RTD tea trade volume has procured a 5% compound annual
growth rate in the past five years and has a projected 3% growth in the next
five years (Euro Monitor International, 2016). Although, internationally
consumers are becoming disinterested in sugared carbonated drinks, soft
drink companies healthier options are retaining the soft drink industrys
progress.

Source:
http://www.library.arizona.edu/applications/quickHelp/tutorial/euromonitordbforbnad

Noteworthy Trends
Health Standards
In order to adhere to consumers growing pursuit of a healthier lifestyle, soft
drink companies are committed to improving their products health
components. According to Passports Industry Overview, Pepsi has eliminated
the artificial sweetener, aspartame, from its Diet Pepsi product and replaced
it with sucralose and acesulfame potassium in 2015 (Euro Monitor
International, 2016). The change was enacted because of the aspartames
association with negative health issues. Pepsi and other companies aspire to
decrease the health side effects of their carbonated drinks to soothe the
publics concern with the ingredients in their products.

Tax Effects
In the interest of controlling consumption of high-sugared drinks, because of
an awareness of obesity associated with such drinks overconsumption,
lawmakers are shaping tax proposals on soda purchases (Wang, 2015). The
tax increases aim to decrease consumers expenditures on carbonated soft
drinks and a recent study conveys the successive result of the tax increases.
According to American Journal of Public Healths report, the findings analyzed
show a 21% decrease of soda consumption in Berkeley, California, since the
cities implementation of a soda tax (Falbe, Thompson, Becker Rojas, &
Madsen 2016). In result of evidence that a soda tax can decrease public
consumption, more soda taxes in other cities may ensue.

Target Markets
In regards to demographics, soda companies have varying intentions for
each of their target markets. For instance, due to pledges made by
seventeen different soft drink companies, advertising towards children under
the age of twelve has notably diminished in recent years. In regards to
advertising aimed at young children, each company had proclaimed varied
agreements. For instance, Pepsi decided to only advertise healthy messages
towards children under the age of twelve, while Coca-Cola pronounced their
decision to eradicate all advertisements aimed at the young demographic
(Fry, Spector, Williamson, & Mujeeb, 2014). Coca-Colas decisions reflect
their desire to avoid directly influencing young childrens interest towards
their sugared products, while Pepsi decided that marketing efforts towards
younger children is still ethical if the promotions are for healthy alternatives.
The pledges represent the soda industrys compliance with rising health
awareness. The companies that chose to make such virtuous commitments,
convey means of ethical practice.

Products
Water Bottles
The healthy living increase has affected the soft drink industry in various
ways, besides soda consumption reduction. According to Passports Industry
Overview, supermarket and retail sales have significantly increased their
bottled water commerce since 2010; while carbonate related commerce in
the same sector has significantly decreased. (Euro Monitor International,
2016). As reported by Prepared Foods, during the past decade, adults who
drank five or more glasses of bottled still water grew by 22% (Prepared
Foods). Again, North Americas developing interest in public health has
affected the soft drink industry. In this case, the increase of water
consumption positively affects the industry. Since soft drink companies
healthier lines of bottled drinks have increased in sales in result of
consumers interest in healthier living, concerns regarding the decrease of
carbonate sales are partially alleviated.

Off-trade Sales of Soft Drinks (as sold) by category: Volume 2010-

2015 (million liters)

Source: http://www.library.arizona.edu/applications/quickHelp/tutorial/euromonitordbforbnad

Interactive Designs
In efforts to appeal to younger generations, millennials and generation Z,
companies such as Pepsi and Coke have established interactive one-spout
touch screen fountain dispensers across the United States. According to
Beverage World, there is a problem with slow traffic flow as a result of
customers taking time to explore the various options offered in Pepsis Spire,
or Cokes Freestyle (Kaplan, 2014). In order to alleviate the worry of wait
times, Coke designed an app that allows a user to explore through the many
options of its Freestyle and save their desired drink. At the fountain machine,
they can access their customized drink with a quick scan. Soda companies
like Pepsi and Coke are maintaining their popularity by expanding on the
personalization and customization aspects of their brands to appeal to the
young adult demographic.
The features of the overview include the leading players, themes in domestic
and international markets, notable trends, target demographics and products
of the soda industry. Because of the information in the report, I hope you
have a better understanding of the soda industrys circumstances. The soda
industrys direction has been heavily influenced by the worlds rising interest
in health standards. Thank you for requesting my efforts to pursue an
analysis on such matters. Please feel free to contact me at
nathanw24@email.arizona.edu if you have questions or concerns.

References
Falbe, J., Thompson H., Becker, C., Rojas N., McCulloch C., Kristine A. Madsen.
(June 24,
2016). Impact of the Berkeley Excise Tax on Sugar-Sweetened
Beverage
Consumption. American Journal of Public Health. Retrieved November
29, 2016.

Euro Monitor International, (March 15, 2016). Passports Industry Overview. p

(1).
Retrieved November 29, 2016 from Euro Monitor International.

Euro Monitor International, (August 29, 2016). Soft Drinks New Product
Development:
Innovation in a New Growth Environment. p (1). Retrieved December
6, 2016
from Euro Monitor International.

Stivaros, S. (2016). IBISWorld Industry Report 31211a. Soda Production in the

US.
Retrieved November 12, 2016, from IBISWorld database.

Water Flows, Soda Slows. (2016). Prepared Foods, 185(1), 20. Retrieved
November 12,
2016, from Business Source Complete.
Kaplan, A. (2014). Can Customization Save Soft Drinks? Beverage World,
133(8), 38-42.
Retrieved November 15, 2016 from Business Source Complete.

Wang, E. Y. (2015). The impact of soda taxes on consumer welfare:

implications of
storability and taste heterogeneity. RAND Journal of Economics (Wiley-
Blackwell),
46(2) 409-441. Retrieved November 15, 2016 from Business Source
Complete.

Fry, Christine, Spector, Carrie, Williamson, Kim A., & Mujeeb, Ayela (2014).
Breaking down
the Chain: A Guide to the Soft Drink Industry. Changed Lab
Solutions Retrieved
December 8, 2016 from Google.