M E M O R AN D U M

Date: December 9, 2016

To: Professor Michaels
From: Amna Mazhar
Subject: Soda Industry

As requested, I have researched key features of the Soft Drink Industry. To ensure you are best-
prepared for the board meeting next week, this analysis provides a comprehensive overview of
the soda industry. Below is a summary of the industrys primary players and role in the market. I
will discuss central products, key services, major players, target markets, and notable trends both
domestic and global in the industry.

Introduction
By definition, an industry works as an aggregate of manufacturing in a particular field. In this
case, that field is soft drinks. Over the past few years, the soft drink industry is facing a decline
in demand. Manufacturers in this industry rely on strong brand loyalty and new artisanal
products... to keep prices high while input costs fall (Stivaros, 2016, p. 2). The soft drink
industry has played large role in consumer culture for years, and it is interesting to note how it is
fairing as of date.

Product Segments and Chief Services

Three Major Segments
According to Stivaros (2016), products of the soft drink industry are segmented into three major
sections:
Regular carbonated soft drinks
Energy and sports drinks
Diet carbonated soft drink and sparkling water

As evident in the chart above, regular carbonated soft drinks comprise most of the products in
this industry. This includes soda drinks that are sweetened with sugar, corn syrup, and other
natural sweeteners (Stivaros, 2016, p. 5). This means that this section is not exclusive to cola
drinks, but holds fruit-flavored beverages and more. Another large segment of this industry that
is experiencing recent popularity is energy drinks. The demand for energy drinks has surged in
recent years, and according to Taylor (2016), the popularity of energy drinks has led to a decline
in the coffee industry. This decline might be in response to consumers switching their caffeine
source from coffee to energy drinks.

Product Packaging
One major part of the soft drink industry that is often overlooked is their packaging. Central to
the appearance of their product, packaging determines what the world sees when they select
particular soft drink. Soft drink products are usually bottled in cans, glass bottles, and plastic
bottles in either single-serve or multi-serve container sizes (Stivaros, 2016, p. 5). Likely, these
varying material-types are based on consumer preference and economic benefits.

Major Players

Source: Beverage Digest

Coca-Cola
As displayed by the graph, Coca-Cola has been the leader in the soft drink industry for many
years. Furthermore, as the worlds, largest non-alcoholic beverage industry [Coca-Cola has]
more than 500 brands, including 17 brands that generate more than a billion dollars in revenue
each (Bailey, 2014, p.7). Any average consumer could attest to the success of this company that
produces and advertises on such a global scale. Despite the decline that the soft drink industry is
facing recently, Kell (2015) notes Coca-Colas moderate growth following their Share a Coke
Campaign that began in 2014. This companys imprint in consumer culture is long standing, and
their growth in advertising their brands never ceases.

PepsiCo
PepsiCo, another major competitor in the soft drink industry, owns [22] leading brands across
its snack foods and beverages portfolio (Bailey, 2014, p.7). While smaller than Coca-Cola in
brand number, PepsiCo is unique because it produces more than beverages. Both companies
however, spend huge sums of money on mutually targeted advertisement inspired by the
rivalry between the two companies (Bailey, 2014, p.7). Like Coca-Cola, PepsiCo has
widespread influence in the consumer world, and the competition between the companies
inspires more advertisement and popularity for each company.

Dr. Pepper Snapple Group, Inc.

As indicated by the chart, the Dr. Pepper Snapple Group, Inc. has a large presence in the soft
drink industry. According to Bailey (2014), this company has grown impressively in the market,
but it lacks the international presence of both Coca-Cola and PepsiCo. In this industry, the ability
to market to the largest consumer base and gain support wholly deciphers the success of the
company involved.

Target Markets
Industrys Primary Market
On a general scale per Strivaros (2016), the soft drink industrys primary market is grocery
stores, gas stations, and other convenience stores. This makes sense because grocery stores
provide the one of the most important retail channels for consumers. When buying other
groceries for their household, consumers can easily purchase soft drinks. Another reason grocery
stores hold most of this industrys products is because people can find grocery stores anywhere,
meaning they can find soft drinks anywhere.

Consumers
It is also important to look more critically at the consumer manufacturers are targeting
particularly. According to Bailey (2014), major players in the industry are focusing their
marketing strategies on millennials. This is likely because millennials comprise a great deal of
the current population, and they also represent what the future of the industry will hold. Also,
teens have consistently been a staple demographic targeted by the soda industry. In fact, at the
2014 Consumer Analyst Group of Europe conference, Coca-Cola reflected on the importance of
the 3.5 billion people who are in their teens and early 20s (Bailey, 2014, p.6). The 3.5 billion are
who we normally see purchasing soft drinks, whether that be an energy drink before football
practice or a soda at the local fast food joint. Their preferences mean a lot to these companies.

Notable Domestic Market Trends

Impacts of a Healthier America on the Industry
Americans have become more health-conscious in recent years, and this has led to some
difficulty in the soda industry. Park (2015) notes that to combat the movement, Mixify, an
advertising and social-media campaign, was launched by Coca-Cola, Dr. Pepper, Pepsi, and the
American Beverage Association. It suggests mixing lazy days with something light [and]
following sweaty workouts with whatever youre craving (Park, 2015, p.18). These newly-
implemented marketing strategies demonstrate the industrys efforts to cater to their ever-
evolving consumer-base. By appearing concerned for the public well-being and making their
product seem healthier, the industry improves their image while staying relevant.

Health Initiatives Stall Revenues

Not only has the trend towards a healthier lifestyle shifted advertisement, but it has caused
revenues to drop. Over the past 5 years, soda revenues have decreased by 0.9% annually; Diet
Coke sales have declined by 7% and regular Coke sales have declined by 2% (Park, 2015). These
findings illustrate the difficulty the soda industry is facing in maintaining revenues due to the
growing trend of organic health foods and the want for a healthier population.

Branding Authenticity
Another trend in the industry that is more recent is the need to cater to consumer cravings of
authenticity. Pepsi launched an 1893 craft version of its traditional cola, saying that the release
showcases the companys long history, giving it authentic links to the natural segment, rather
than a large corporation (Roderick, 2016, p. 1). This represents the growing population that
cares about the brand-type they are using on daily basis. It also displays how much each
manufacturer cares to emphasize their own brands.

International Trends
Industry Popularity Dependent on Countrys Development

While soda drinks are heavily demanded on a global scale, the level of demand runs consistent
with the development of the country. One article points out how, countries which earn low
levels of income will not use their savings, in the long run, to demand manufacturing flavored
syrup drink concentrates and related products for soda fountain or manufactured soda drinks
(The 2016-2021 world outlook, 2013, p. 25). This makes sense logically, and is evident from
the bar graph above which demonstrates how the projected market potential in Africa, a
continent with many developing countries, is much lower than in the Americas.

Size Reduction in Industry Products

Another trend that is extremely noticeable in the industry that is noted by Taylor (2016) is that
soft drinks are now coming in smaller sized cans. This once again can be attributed to a need to
reduce obesity in countries affected by the industry globally. This requires reformulation and
switching customers to lower-calorie offerings, but it also means finding ways to make more
money selling less soda (Taylor, 2016). For now, the solution is smaller bottles and cans, but
downsizing cannot serve as a permanent solution for the industry.

This document summarizes the soda industrys top products and services, key players, target
markets, and domestic and international trends. This overview should serve as an outline of the
industrys basic features. If you have any further questions, please contact me at
amnamazhar@email.arizona.edu.
 Work Cited

Bailey, Sharon. (2014, Nov 20). Understanding the soft drink industrys key markets. Market
Realist. Retrieved from http://marketrealist.com/2014/11/understanding-soft-drink-
industrys-key-markets/

Kell, J. (2015, March 26). U.S. soda sales dropped for the 10th straight year in 2014. Fortune
500. Retrieved from http://fortune.com/2015/03/26/soda-sales-drop-2014/

Park, A. (2015, August). Sizing up your diet? The soda industry would rather have a talk about
exercise. Time. Retrieved from EBSCOhost database.

Roderick, L. (2016). Pepsi jumps on craft craze with launch of '1893' range. Marketing Week.
Retrieved from EBSCOhost database.

Stivaros, C. (2016, October). Soda production in the US. IBISWorld Industry Report. Retrieved
from IBISWorld database.

Taylor, K. (2016, January 2). The 4 biggest ways American beverage consumption will change
in 2016. Business Insider. Retrieved from http://www.businessinsider.com/4-big- beverage-
industry-trends-in-2016-2015-12
The 2016-2021 world outlook for manufacturing flavoring syrup drink concentrates and related
products for soda fountain use or for the manufacture of soft drinks. Icon Group
International, Inc. Retrieved from MarketResearch database.