The Breeze With Beverage Digest
The Breeze With Beverage Digest
Episode 25: Coke Threads the Cane Sugar Needle. C-stores and Energy’s Unstoppable Rise. Plus, Prebiotic Pepsi?
Beverage Digest Editor & Publisher Duane Stanford and industry expert & regular podcast contributor John Sicher tackle three big topics today.
Duane and John ponder new sugary Coke innovation coaxed by President Donald Trump. They also assess convenience store traffic and what it means for the seemingly unstoppable rise of the U.S. energy drink category. And finally, Pepsi announced a new prebiotic cola, right after acquiring Poppi.
This is the Breeze with Beverage Digest. I'm your host, dwayne Stanford, the editor and publisher of Beverage Digest. The Breeze is where we bring you into the kinds of industry conversations we have every day at Beverage Digest. We dissect what's happening, connect the dots and ask the most important question what does this mean? I'm joined as always by my friend and co-host, john Sitcher. Many of you know him as a former editor of Beverage Digest. John has since consulted for companies ranging from Coca-Cola to Pure Circle. John, how are you?
Speaker 2:Hey, dwayne, I'm very well. How are you doing?
Speaker 1:Doing pretty good, doing great. It's a little hot. Dwayne, I'm very well. How are you doing? Doing pretty good, doing great. It's a little hot here, you know, very hot, actually 100-ish degrees.
Speaker 2:It's hot in New York too. It was 98 yesterday, it's going to be in the mid-90s today and then it's going to break. But boy, it has been really, really hot.
Speaker 1:Plenty of beverages, man. Plenty of beverages, plenty of sports drinks for me.
Speaker 2:So there's been a lot of news recently, dwayne, and I'd love to get your thoughts on something. Apparently, the Coca-Cola company has a new chief innovation officer who resides in a big white house on Pennsylvania Avenue in Washington, and there's been a lot of news about his talking about cane sugar and soft drinks, and I guess Coke is going to introduce some product with cane sugar in it. What do you think about that? I'll share mine too.
Speaker 1:It's been a whirlwind the last couple of weeks. I mean I did at least a dozen TV, radio and print interviews, interviews a tremendous amount of interest. At one point I counted one day, you know, over a couple of days it was like 80 or 90 stories that I counted out there. I mean everyone was on this story and of course you know the initial tweet by the president, you know created some belief that Coca-Cola might change the entire flagship from high fructose corn syrup to sugar. And you know that was immediately.
Speaker 1:You know, obviously those of us in the industry who you know pay close attention know that that was a non-starter so it was most likely going to be some sort of specialty product. Turns out that's exactly what it's going to be. It's going to be a cane sugar product in the US, much like Mexican Coke you know, which you know the company's been doing well with. They've been growing that over time almost like a craft specialty, premium offering, clean label offering. This will be a version of that with US ingredients.
Speaker 1:It's always hard to know. You know what came first the chicken or the egg? Did Trump's discussion with Koch CEO James Quincy during the handover of the inauguration bottle that Koch does every inauguration, whether Trump's prompting their push this forward or whether this is something that they've had in the innovation pipeline and decided to move it up. You never know. But you know, aside from the president pushing for this, it's a product that makes total sense. It's a product that you could easily see them having done because of the popularity of cane sugar, coca-cola that's imported from Mexico and, of course, this is a product that wouldn't have to be imported, so you could see some benefits there.
Speaker 1:James Quincy went on Fox News and actually showed the package and it is a glass bottle. We haven't heard definitively whether it's going to be only in glass. I suspect it will. I don't see this being in PET or cans. I mean, who knows If it does well enough, like any product, who knows what other packaging it might hit. But it's been quite interesting just to watch how much interest there was in that entire story.
Speaker 2:Yeah, you know, I scratched my head a little bit, I got to tell you. I think maybe some of this comes from some of RFK Jr's comments about HFCS a while back. But as I understand it and I spent a couple of years actually more than a couple of decades covering this industry as I understand it there's very little molecular difference between cane sugar and HFCS. They both taste good. It goes back many years when sugar was too expensive. The corn industry developed HFCS, made it better and better and better. The taste is very good. Now they both have calories.
Speaker 2:I really question, and the cane sugar product that Coke's going to come out with it's going to have to be premium priced because sugar is still quite a bit more expensive than HFCS. Where I scratch my head is and I certainly understand that Koch's chief innovation officer in Washington taps in well to the public sentiment I don't understand the rationale for the product, because I think that the majority of people who drink carbonated soft drinks drink them because they taste good, because they go well with food, they're sort of fun to drink in a social occasion. I don't think many people are drinking them because they have, because they're concerned about health and wellness of the ingredients. I think that, on top of that, I think HFCS is, from what I understand from the research that I did many years ago is safe. It tastes good, it's very similar to sugar, has about the same caloric level. So, other than just offering a choice to some people who might want a premium price product, this whole thing sort of makes me scratch my head.
Speaker 1:I mean, you know a lot of that has to do with the scale, right, you know how big is this product going to be. I think everything you're saying is absolutely true. But you know, had they dropped this product without you know any kind of prompting from the president or that tweet, it would have been like oh okay, that's interesting. You know, you might do a brief on it. It'd be interesting that they're offering it, maybe a little more interest in that. You know, cane sugar glass bottle. But it wouldn't have been in no way the sort of product innovation whirlwind of a story that it was, given the fact that the president of the United States was involved. But you know, john, I think again it depends on the scale. Here.
Speaker 1:I can see a place for this in certain chains, for instance, that cater to more of a clean label vibe healthier for you, vibe. You know there's a lot of chains that are coming up like that and some of them just aren't going to serve. You know products that have either artificial sweeteners or things like high fructose corn syrup. Even though you're right, the science is pretty clear there's no discernible difference, even health experts. Marion Nessel, who's been a critic of the soft drink industry for many years says there's no appreciable difference between those two. But there are some consumers who want that. There are some customers you know chains that want uh, those kind of clean level, love label products that they could say are natural, um, uh and and uh, and so I think there's a place for it and again, a premium product. I don't see this being on any kind of massive scale at all.
Speaker 2:I agree, I agree with you. I agree with you. I agree with you. You know, I think that you know. I don't know how available across the country Mexican Coke is now. Certainly in New York it's very available. So at least in New York people who want a sugar-sweetened cola can easily get Mexican Coke in New York. Does this replace that? Is it an addition to that? I guess time will tell right.
Speaker 1:Yeah, I'm not really sure about that. I would think not. I mean Mexican Coke has been making it into grocery stores. I mean you can buy it here in Atlanta or there have been times I haven't seen it as much lately but you would see it on incremental store displays. You might see, you know, a couple of four packs on the shelf. They did a specialty Georgia peach version of Coca-Cola with cane sugar. A few years ago before the pandemic they did a California raspberry. So they've experimented with this kind of thing before.
Speaker 1:So you know there's some kind of market for it and I think also, just as these things are, you know, it sort of also is another way to kind of get people to consider the brand and create a little halo effect and those kinds of things, something new, something different. I think one thing that's been pretty clear in my reporting over the last few years is consumers really do like glass bottles, especially in food service channels. Coca-cola Southwest Beverages one of Coke's big bottlers in states like Texas, in El Paso, they have a test actually where they bring their refilling bottles. I wrote about this a couple of years ago but they take imported Mexican Coca-Cola, bring it in and then send the bottles back, refill them and do a refillable glass bottle program in some of these food outlets and it's been very successful. That's pretty particular because you can just go right over the border to a plant that Koch has there in Mexico, over the border in El Paso. But you know there's a lot of that kind of activity going.
Speaker 1:So this, to me, is just in keeping with all that. It's just that, given the fact that the president's been involved in all of the things that the administration is doing when it comes to new, you know, efforts around Make America Healthy Again really kind of stirred this up. And you know, I think you know Coca-Cola it's a pretty tricky spot to be in and you know, if you've got something like this off the shelf and you could put it out there and create a specialty play, I don't think it'll replace, you know, to your play, I don't think it'll replace. To your question, I don't think it'll replace Mexican Coke. I think there's still a place for that too, especially in Hispanic markets where there's kind of a nostalgia for that. But it is a way to kind of expand beyond that and do it in a way where you're using US ingredients and do it in a way where you don't have the import costs, even though you've got the sugar costs, and you know, I think it just kind of fits in that way.
Speaker 2:I'll make a prediction, Dwayne, that a very substantial amount of the volume of this new product, the Coke product flavored with cane sugar, will be sold at the 2028 Republican National Convention.
Speaker 1:You know, speaking of premium channels and products etc. One of the things we wanted to get on and talk about today, john, was the C-Store channel and of course we talked a good bit about that last year and you know this is an incredibly important channel. It's a premium channel, it's a single serve, immediate consumption channel and you know a lot of the industry's profitability, consumer pressure those kinds of things show up in this C-Store channels and you know it was. Traffic was down last year. This year we're starting to see signs of improvement. You know the energy category, which is so important, has been looking better there. Let's start out by. You know I just want to kind of get your high level take. I know you know you've been looking at some various analyst reports, as have I. What's your sort of encapsulation of where we are when it comes to C-Store traffic and you know what we can expect in that channel this year.
Speaker 2:Let me start by telling, by sort of recounting, a story that I certainly have bended your ear many times, but I think it's fascinating. So my wife and I have a house that we go to in the summer out in Long Island. We've been going out there for about 15 years and in this small town we go to there's a convenience and gas store and it's been under different ownership names over the years. It's been closed and opened. Right now it's a speedway and a very nice big speedway.
Speaker 2:So about 10, 12 years ago this store has its coolers arranged in the back of the store, at a right angle, and I think there are 16 or 17 cooler doors. And I think there are 16 or 17 cooler doors and right now nine of those cooler doors are for non-alcoholic beverages. Ten years ago, at the corner of this right angle, where the coolers are the corner, the two main cooler doors right in the center were filled with Coke and Pepsi CSDs. Big, a lot of facings, a lot of shells of Coke, sprite, diet Coke, pepsi, mountain Dew, diet, pepsi. Let's fast forward to today. Now All those coolers at the center of this sort of panel of cooler doors are now energy drinks.
Speaker 2:Last time I looked, and it was about two weeks ago, there was out of nine non-alcoholic beverage cooler doors, dwayne, there was only one shelf of brand coke in one cooler and it's been stunning watching energy drinks, at least in this, and I'm not sure what it looks like in atlanta. I'd love to hear your your views. It's been stunning watching energy drinks basically push csds out of the coolers, floor displays stack. The same thing, energy drinks stacked up, uh, near the checkout counter. Same thing energy drinks Dedicated coolers to Monster and Red Bull near the front of the store. You know, I asked the woman behind the cash register a few weeks ago about the energy drinks and her reply was that's all folks want, ranks and her reply was that's all folks want. And before we get into data and trends and that kind of stuff, it's just stunning what's going on in this big speedway out in Long Island.
Speaker 1:Give me a better sense of what the clientele is. What's the demographics in that area? I mean, do you have, is there, a lot of laborers in this you know of laborers in this area or is it a mix of vacationers and high and low income type of people? What does that look like?
Speaker 2:That's a great question. The answer is it's everything. So the little town is a fairly, I'd say, upper middle class demographic town. There's only one gas station in town, so that's where people go to get gas. They go into the C-Store. The pretty good traffic that I've watched going into the C-Store. So in the morning it's a lot of workers, a lot of people heading out to their jobs and I've stood by these cooler drawers just to watch and you see, generally young, youngish men come in and they go to the cooler and they grab a couple of c4s or monsters or or red bulls, uh, and and for their debt, for their day, um, so it's a it.
Speaker 1:What about stuff like Celsius and Alani New, that kind of stuff? Are you seeing much of that there?
Speaker 2:Some Celsius too. The guys would come in in the morning, apparently on their way to the workplace, seem to buy Monster C4 and Red Bull. I've seen that more than Celsius. There is a little bit of Alani New in the cooler. Not a lot at this point in time, but, as I said, if you basically landed on Earth from Mars and wanted to understand the beverage business in the US and went into this one C-store, Dwayne, you'd think that the beverage industry is an energy drink industry. There's so little. There's some sports drinks, there's some water, but it's overwhelmingly energy drinks.
Speaker 1:Yeah, I mean I think that's probably more stark than what I see here. But I mean, john, you've been watching this industry for so many years, so what you're seeing, I would bet, is quite a shift in that store. Absolutely, I think it makes sense in a couple of ways. One, we do know that energy drink consumption, household penetration, is growing. More people have been brought into the category.
Speaker 1:I would suspect that a lot of those energy drinks you see going out, or some you know a significant portion of those over previous years, were probably zero sugar offerings. I would also suspect that there's a fair amount of Celsius going out the door there too. I mean, so we're seeing that we're seeing more people consume these products. And also you know Bonnie Herzog's latest Beverage Bites report that she does every quarter, where she surveys C-store owners, c-store retailers. They, you know a significant amount of folks, or what she found is that they're actually giving more shelf space to energy drinks and they're feeling more. You know better about that category and about their traffic. And so you know clearly and I've heard other anecdotal evidence too that you know shelf space is expanding for the category, for the energy category, especially in immediate consumption. So all that makes total sense to me.
Speaker 2:I don't pretend to believe that a Speedway on Long Island is representative of national demographics. You know it's a summer-oriented community, probably upper middle class. But when you go into a C-Store in Atlanta or any place in Georgia, do you still see a fair number of doors and facings of CSDs, or not so much anymore?
Speaker 1:Yes, the Speedway around the corner from my house definitely has more CSD stock than what you're seeing. Energy is a huge part of the cooler in that store as well, though, and I would say that, anecdotally, energy is gaining shelf space to CSDs and you know, I kind of see that around Metro Atlanta as well, especially now that you've got, you know, new entries like C4 and Celsius and Alani New. You're starting to see that in some of these retail chains, so I think that's probably a trend that will continue, especially if they're able to it's such a premium product and they're able to grow household penetration. I think that's a trend we'll continue to see. Let's take a quick break from the conversation so I can tell the audience about the Keurig Dr Pepper System Map Book. This just-released guide offers detailed territory-by-territory maps covering both Keurig Dr Pepper's company-owned distribution system and the US distribution territory structure specifically for brand Dr Pepper. We also detail where flagship Dr Pepper is handled by Coca-Cola and Pepsi bottlers. Think of this as three guides in one. And don't forget, you can get equally detailed territory-by-territory maps of the Coca-Cola and PepsiCo systems as well in our the Coke and Pepsi Systems Resource Guide. Understand the critical Coke, pepsi and Dr Pepper distribution networks from the ground up.
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Speaker 2:If you look at the data Dwayne, if you look at the first half syndicated retail data, it's pretty stunning. You know, in C-stores, CSDs I'm talking about volume now CSDs are down, sports drinks are down, bottled water is down, juice drinks are down, ready to drink tea is down. Only one category, major category, is up and that's energy drinks.
Speaker 1:I mean that's really huge because energy drinks on a volume basis are about half of. You know, in the first quarter about half of energy drink volume was done in C-stores. You know that's how important that channel is and on a dollar basis it's more like 60% of the energy category is done through C-Store. So just an incredibly important channel, especially when it comes to traffic and consumer sentiment.
Speaker 2:So what do you think I mean, if you look at those other categories other than energy, ranks in terms of volume. All the other major categories are down. And of concern to C-Stores is if you compare C-store performance, dwayne, with the overall syndicated retail base, meaning if you compare the combined data for all the channels with C-stores alone, c-stores are underperforming in all categories, even including energy drinks. So, for example, in energy drinks, across the retail syndicated base, energy is up about 9%, but only up 6% in C-stores. And in every category C-stores are underperforming and it's hard to understand. And it's hard to understand I mean I assume a lot of it has to do with the fact that the C-Store consumer is a blue-collar consumer. Prices are very high. Csds are, for a 20-ounce bottle, $3 and up, at least up here in New York often, and I think C-stores are facing a challenge right now and I think it's a great concern for the beverage industry.
Speaker 1:Yeah, you know, one of the analyst reports I believe it was Komel Ghoshwala Jeffries, in a report he just did in recent days, talked about the fact that household penetration is growing in the category. But right now you're seeing the amount of drinks that a customer takes away when they go into a convenience store is lower and they're also just spending less on energy drinks, even though more households are buying them. So that speaks to what you're saying in terms of. I mean, this is still a category that slowed pretty, you know, compared to previous years. It was a pretty surprising and somewhat puzzling decline last year, but there was a lot of optimism that it would come back, which it has.
Speaker 1:But you know, clearly you still got consumers under pressure.
Speaker 1:I mean, gas prices are pretty good right now, so you don't really have that working against the category. But people are spending a lot more on groceries, you know, even though you know the inflationary, you know the rate of inflation on groceries has tapered from where it was. It's still high. It's stacked on several years of pricing growth. So consumers are more pinched. Lower income consumers, of course, have been pinched. But what we're also hearing this year is analysts talk about the fact that, through some of their research that they do using numerator and some other sources, that they're starting to see higher income consumers get pinched too and cut back on some of their purchases, and so I think that speaks to what you're saying in terms of what we're seeing in the category even though energy is up, it's decelerated from where it was and there's still concern about where that could go in terms of the consumer and what happens with inflation and what happens with uncertainty around tariffs and just all of those things that are a mishmash of uncertainty right now.
Speaker 2:You know, I think that and we've talked about this a lot in previous podcasts in different contexts but I think that if you look at this C-Store data and you see that energy drinks are the only category that are up in volume and energy drinks are certainly premium priced, I think that we're basically what we're seeing is what we've talked about before, and that is that there are certain consumers and certain occasions where they want their beverage to work harder for them than just taste good and just taste good and refresh, and that energy drinks, basically they taste pretty good today.
Speaker 2:They they're refreshing, they give you the energy benefit and I think people say to themselves, conscious or unconscious you know, if a 20-ounce bottle of Coke or Pepsi is three bucks and a can of energy drinks is about the same price, I'm getting more value for my dollars than an energy drink because it's doing more for me. And you know, I think it's a big issue for the soft drink industry because, again, I have not looked at any kind of financial data recently, but certainly going back in time, and if I'm wrong about this, I hope some of your bottler listeners and subscribers will write in and tell you. But I believe for the bottlers in general, north of half of their profit came from selling 20-ounce NC stores. Well as that, drops and drops and drops, it creates new kinds of issues for the bottlers and the bottling systems.
Speaker 1:Yeah, I mean I think your point about functionality is right on. I mean this is just yet another example that consumers want functional refreshment. You know, like you said, they want refreshment that works harder for them. I mean just the fact that, given this kind of challenging you know, inflationary environment for some consumers, that they're not going away from energy drinks, they're not just dropping them like we have seen in the past. It's kind of an easy thing to drop and cut your expenses and in fact you're seeing households come into the category despite this environment, but they're maybe spending less per trip and they're not buying as many a week Just speaks again to the fact that they still want this functionality.
Speaker 1:Now you mentioned to me recently one of the reports that you saw I can't remember who it was, it might have been Evercore that talked about some of the shift in numerator data that shows kind of a shift from cold coffee to energy drinks. You know what are your thoughts on that? I thought that was quite interesting when you were picking up on that recently in one of our conversations.
Speaker 2:Look, I think it goes back to a very, very, very important thing that you mentioned a few minutes ago and that is for a long time, energy drink growth in the US was largely based upon existing energy drink consumers drinking more. Now it appears and I've seen it in a few research reports and we can extrapolate it sounds like energy drink household penetration is starting to grow. It was an Evercore report who said that energy drinks are starting to source volume from cold coffee. The other thing that you've written a lot about is certain energy drink brands being introduced and marketed to expand the energy drink consumer base. So I think that I mean I think the energy drinks are, and I didn't necessarily believe this 15 or 20 years ago, but I think energy drinks are almost unstoppable today and I think that these are the categories today, dwayne.
Speaker 2:I think that these are the categories going to get bigger and bigger and bigger and bigger and it's going to basically source volume and dollars from a lot of the other categories, and you know it's going to be a challenge. You know. You know it's going to be a challenge for the big, the big soft drink companies. Coke has their deal with Monster, but they do not own an energy drink brand. Pepsi has gotten more into energy drinks, but it's still remarkable to me that the biggest and best beverage companies in the world are not playing in a major way in terms of brand ownership in this extraordinarily growing category. I think the day will come when they probably have to, because this category is not going away. It is here to stay and it's going to keep growing.
Speaker 1:It really is incredible and especially given the fact that they really kind of helped grow these categories to the place where they are now and that, you know, created the kind of opportunity that made a company like Celsius keep banging away at this for 20 years until they kind of figured out the right mix. And then you have all these new players coming in. You know, after seeing what Bang Energy did, how they broke in and you know these companies that have come in and really helped expand the market. And you know the categories were propelled for so many years by these big distribution deals, like you know, coca-cola and Monster. You know, which has been a wildly successful partnership. I mean, coke still owns almost 20% of Monster, so they are playing in a, you know, significant portion of that company.
Speaker 1:But these aren't drinks they created themselves. And you know, obviously we know why that evolved that way because you know, as these energy categories were coming up, and especially since they had sugar and caffeine, you know these big companies, like you know Coca-Cola, were faced with. You know massive targets on their back. You know in terms of, you know criticism over, you know the extent to which kids might access these drinks and how dangerous they were. There was a lot of sort of misinformation about how much caffeine were in these drinks compared to even a Starbucks coffee, which I think the industry has done a really good job of getting a handle on in recent years, and I feel like that discussion has sort of largely passed us. It's sort of largely passed us, but I think what's happened now is with the fact that most of the growth, if not all of the growth, right now is coming from zero sugar.
Speaker 1:Better for you platforms. That's what's growing the consumer base. That's what's getting people to come back into the category. I think that makes it a safer and safer bet for companies like Coca-Cola to take more and more of a meaningful role over time. I don't know if that's possible. I mean, it's a massive company now Monster, and what would that take to acquire that? And you know all kinds of different factors that we've talked about before. But you know these companies owning these categories start to make more sense from a risk profile too, because the category really is about zero sugar now and I don't see that changing There'll be a place for the full sugar offerings because there are consumers who want that. People out you know work in construction and all. They need that sugar and want it, and multicultural consumers like that. So you're going to have a place for that. But you know the category is shifting so dramatically towards no sugar and these better-for-you platforms are really going to bode well for the category and back up what you're saying about this category might be unstoppable for a while.
Speaker 2:The world has changed. I may have told this story on a previous podcast. You know, when I basically started out at Beverage Digest in 1995, a PR person, a media relations person from one of the big beverage companies, everybody wanted to give me their message as to what was important and what they hoped Beverage Digest would report on and not report on. And a media relations person from one of the big beverage companies called me up one day and said John, we'd really be appreciative if in the pages of Beverage Digest you never mentioned the word caffeine. And that was because back then they were worried about caffeine disclosure, caffeine regulation. California was toying around, if my memory is correct, with, I think, labeling laws for caffeine. And the world has changed now. Caffeine is now a major positive attribute in beverages. So you know, as I said, this category is not going to go away.
Speaker 2:You know, going back to C-Stores for a minute, you know one of the concerns that you hear occasionally is concerns about the 20-ounce bottle and some people say it's too expensive and there's too much liquid in it, that people don't want to spend that much money for a bottle of soda, that they're not going to finish. And you know, I wonder whether you hear that or what are your thoughts on that. I mean, it's a lot of liquid, I can tell you. You know I'm not 18 years old or 22 years old, but when I buy a 20-ounce bottle, I put it in the cup holder in my car and I generally dump some out. Eventually I don't finish the bottle, but the idea that it's too expensive and there's too much liquid do you hear much of that?
Speaker 1:I think it's a great point, john, if the industry could wave a magic wand now and replace the 20-ounce bottle with some other smaller package size and make the numbers work and just transition that supply chain without a lot of pain.
Speaker 1:I think they would do it. I mean, I think you've seen a number of interesting package sizes out there Coca-Cola Consolidated I was out in the market with them earlier this year and they've got that 12-ounce bottle, pet bottle, very interesting bottle. You know you've got these smaller package sizes that make the, you know, your revenue growth management kind of work for you but also, you know, are better for consumers who aren't, you know, wanting that 20 ounces of liquid. That we see. I mean the 20 ounce to me is kind of still somewhat of a vestige of, you know, the previous models that Coca-Cola and their bottlers use to figure out how to apportion revenue through concentrate sales. But it's kind of one of those that, as you know, the supply chain is just completely set up around it and making that transition is, you know, easier said than done. But I think there's definitely, I think you'll see some kind of shift to that over time.
Speaker 2:Yeah, very much easier said than done, because you know, I think that, for example, for C-Store operators, if you overnight replaced 20 ounce at $3 with 14 ounce at $2, even if they were getting the same margin, the number of dollars they collect from consumers goes down and, as I understand it, no one wants to do that. They want both the margin and the total dollars. So I think the industry's great success with 20-ounce has put them in a little bit of a bind today and I think that's maybe one of the small reasons we're seeing the success of the of energy drinks in C-stores, because it consumers simply think it's a better value for them.
Speaker 1:I mean, if you think about it, energy drinks the you know, one of the predominant packages now is 16 ounces so, and that's still four ounces less than predominant packages now is 16 ounces so, and that's still four ounces less than carbonated soft drinks, you know 20 ounce bottle of Coke or Pepsi or Dr Pepper. So I mean your point's well taken in that consumers, even though it's a, you know, they see value in the smaller package if there's additional functional benefit, and you know 16 ounces seems to be a right amount of liquid, you know, although you know you also have the 8.4 ounce that Red Bull is so famous for and you know most companies, you know, have some version of that too, just to be able to serve different consumer types. But but yeah, it does speak to the fact that, aside from the fact that energy drinks have that extra functionality that you know, carbonated soft drinks don't have to the same level. I mean, it still has caffeine, though, and it still has the pick-me-up sort of factor. It does seem like a mismatch though in terms of the package size there.
Speaker 1:Yeah, so, john, before we wrap up there, I've got to ask you about the Pepsi prebiotic soda that we, you know we reported about this. We broke that news last week. You know heard a lot of conversation about it. What's your take on that? This is a Pepsi-Cola product with prebiotic. You know fiber and you know low calories, low sugar. Low calories, low sugar. Pepsico seems to think this is the one in the next generation of carbonated soft drinks.
Speaker 2:Look, I applaud any company that basically innovates and spends money on it and takes a risk on innovation. It's my belief that Pepsi's prebiotic business is going to be in poppy. I think people who basically are Pepsi drinkers are drinking Pepsi for other reasons and you know I'm always happy to see a company take a risk, take a shot at something. But my guess is that a year or two from now, the bulk of Pepsi's prebiotic business, if not their entire prebiotic business, will be in poppy and not in the Pepsi prebiotic soda. What do you think?
Speaker 1:Yeah, I mean I could see this being the kind of product that you know may not be around in two years. In two years I do think it's an interesting attempt to kind of bridge the prebiotic functional trend over into a broader set of consumers. You know, worth a try. It all comes down for me to how much they invest in it and you know how much they lean into it. I mean this is not the kind of like big, starry launch. I think that would probably be a mistake to go too wide and too big.
Speaker 1:With a product like this, experimenting makes some sense.
Speaker 1:You know PepsiCo, for years now, has been really looking hard at what's next when it comes to carbonated soft drinks, and you could even argue they've pivoted too far in past years and kind of got out in front too quick on this because, as we've seen from the Coke business, this is still a very profitable growing category certain parts of it.
Speaker 1:So I see this as a continuation of that effort. And so you know I see this as a continuation of that effort. I mean I did have a conversation with the head of Pepsi Beverages US, ram Krishnan, around this product and you know one of the things that occurred to me and I was curious. His take was that you know, there's no longer, as we've talked about with Coca-Cola, there's no longer sacred cows around these big flagship products. These companies are willing to experiment and innovate and they seem less concerned about that long-term notion of diluting the brand no-transcript. And you know, we'll see. But you know, I do think one takeaway for me for that product is just the willingness of these companies now to experiment and iterate around these big flagships and I think that'll be an interesting debate as to how good of an idea that is or not to do that.
Speaker 2:I agree with you on that. I agree with you totally Well.
Speaker 1:John, as always, a lot of fun. I hope everything's well there in New York and we'll do it again soon.
Speaker 2:Thank you, dwayne, good to be with you again. The Breeze is produced by Beverage Digest.
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