By Sarah Morgan
It’s getting tougher to sell soda to Americans judging from Coca-Cola‘s (KO) earnings report this morning.
The company reported global sales growth of 5% for the full fiscal year of 2011, and 3% for the fourth quarter, but most of that growth came from international sales. For years, Coca-Cola brand sales volume grew 13% in China, 15% in India, and 33% in Thailand, for example, but only 1% in North America. Overall sparkling beverage sales in North America for the fourth quarter were, well, flat.
In fact, soda consumption in North America has been declining for several years, and that decline started before the recession, so it’s not just a temporary shift, says Tom Mullarkey, a stock analyst with Morningstar. Coca-Cola can certainly still grow sales, but analysts say that growth will come from emerging markets and from still beverage options like juice or water. “Both Coke and Pepsi are targeting a plethora of still beverage options — your juices, your teas, your waters. There’s just a lot of products out there that are gaining share of stomach,” Mullarkey says.
The decline in U.S. soda consumption has been sharp, according to a report by Mintel Group, a market research firm. Regular soda sales held up a little better than diet soda sales through the recession, but declined by 20% from 2005 to 2010, according to Mintel. Key demographics like teens and young adults have also been cutting back.
To be sure, a lot of Americans still drink soda: Three out of four of us will drink at least one carbonated soft drink in the next two weeks, according to research by the NPD Group. “You won’t find any other beverage like that,” says Harry Balzer, the chief industry analyst for the NPD Group. However, it is true that ten years ago, that number would have been 80%, Balzer says. “Everybody has cut back on carbonated soft drinks, but the biggest decline has been among children,” he adds. The percentage of kids under 18 who have at least one soda in a given two-week span fell from 80% to 69% in the past ten years, according to NPD Group data. For soda-sellers, that decline means the business is a battle over market share, Balzer says.
The bright spot for Coke: Pepsi’s doing even worse. According to Mintel’s research, Pepsi lost 8% market share from 2009 to 2010, while Coke Classic lost just 1.2%. Meanwhile, Coke Zero gained almost 10% in that period, in part because it’s more successful than most diet sodas amongst the key soda-guzzling demographic of young men ages 18 to 34. Coke Zero sales volume grew 11% in North America in 2011, according to this morning’s earnings report.