The Breeze With Beverage Digest
The Breeze With Beverage Digest
Episode 29: State of Play Going Into 2026
Coca-Cola’s leadership change. PepsiCo’s post-activist playbook. KDP’s upcoming strategic re-organization. The commoditization of bottled and sparkling water. MAHA’s regulatory shakeup. Refocusing the consumer on sports drinks. As we start 2026, Duane Stanford and John Sicher dive into the hottest industry inflection points.
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, hello, good morning. How was your holiday?
SPEAKER_02:Duane, uh, all good. Happy New Year to you. How's everything with you? How was your holiday?
SPEAKER_01:Same, great, man. We had a good little trip to San Diego. It was fun. Uh I tell you, I've been uh intrigued by all this Venezuela news, you know, Maduro's capture. It's been kind of an eventful start of the year. And you actually sent me this really fascinating story uh, you know, from the Venezuelan market way back in 1996, before my time in the industry. Uh I was somewhat aware of it, but uh, you know, that was really pretty interesting what happened back then. Tell us a little bit about that. I'm interested in your take on the whole thing.
SPEAKER_02:Well, there was another capture about 30 years ago, and it was very, very big beverage industry news. Uh, back in the 1990s, Venezuela was the one market in Latin America where Pepsi had a very significant share. And one day in August, we all woke up to the news that secretly Coke had signed up the Pepsi bottler, and that overnight the Pepsi bottler owned by the Cisneros family, the Pepsi bottler became the Coke bottler. And Pepsi's share, which was significant, went to almost zero. And Coke basically gained a huge amount of share in in Venezuela. It did not make for uh um happy relationships between Coke and Pepsi. Uh, it was very embarrassing to Pepsi. Roger Enrico, who was running Pepsi back then, was a good friend of the Cisneros family, and it was it was it was really quite a story. Um anyway, the Cisneros family uh became the Coke bottler in Venezuela, and then of course uh Panamco bought them out, and then Femsa bought them out. So, at least as of some point in time after that, Femsa, I believe, was a bottler in Venezuela. I'm not sure what's going down there, going on down there anymore in terms of the sale of U.S. soft drinks, but that that the New York Times story was a coke coup in Venezuela leaves Pepsi high and dry. It was some it was some story 30 years ago.
SPEAKER_01:Yeah, that is just so fascinating. Now, of course, PepsiCo has re-established itself in the market, but that's a really tough market because of inflation and some of the leadership there. So it'll be interesting. I, you know, I was uh I saw a Seeking Alpha story that suggested that you know both of them might have a better time with their supply chains and uh, you know, if there's a little more stable leadership there. So we'll see. It's uh very interesting though.
SPEAKER_02:It's it's not clear to me today whether um more oil or soft drinks are being pumped in Venezuela, but it's uh it's a day, I think it's a difficult difficult market for everybody right now.
SPEAKER_01:Absolutely. So, you know, all right, so John, today what we've decided to do is to look back together at some key stories from 2025 and just to remind ourselves what what an amazing year it's been, a very eventful year in Beverages. And I think that always helps to kind of look forward and and give us a sense of what to expect next and what some of the big issues will be uh in the coming year or so. Uh we've got a lot to cover, so we're gonna go pretty rapid fire. So if you're ready to rock, I'm ready to roll. You good?
SPEAKER_02:Well, I'm ready.
SPEAKER_01:All right. So speaking of uh Venezuela, by the way, uh you know, there's gonna be a new CEO of Coca-Cola that was announced uh some weeks ago. Uh Enrique Braun is gonna take the reins from John Quincy in March. And both of them actually joined the company in 1996, which is when that Venezuela story happened. So uh, you know, they've got a long history in Latin America, so I'm sure they're watching that really close. But any, what's your quick thought on you know new leadership at Coca-Cola in the coming year?
SPEAKER_02:Look, I you know, I admire the job that Quincy did um in terms of the company's finances. Um he basically has been able to, in you know, in the face of weak and declining volume, has been able to keep the company's financial momentum going. The stock prices performed well. I think that but Coke, you know, Quincy basically ran this company for roughly 10 years, and it's still roughly the same company that it was 10 years ago. It's still very CSD reliant. Um the Fair Life has done well, Costa obviously is not, body armor has not done not done so well. It's uh reported a lot of volume losses since Koch bought it. I am hoping that the new CEO will basically begin to diversify the company's portfolio. I think it basically really has to become less reliant on CSDs because I don't see much, I don't two things. I don't see much sign of CSD volume recovering, and I think the era of getting enough pricing to well offset weak volume is probably coming to an end.
SPEAKER_01:Yeah, I think Quincy's legacy probably includes uh Fair Life for sure, uh, what's happened with Fair Life since building a new plant, looking to add even more capacity beyond that. Um, I think he also you know changed the culture of the company in a pretty significant way in terms of you know uh you know saying that look, we're gonna experiment with some of the key brand flagship brands. We're we're not going to uh hue to the past so strictly, and we're also gonna take some risks, some calculated risks, and be willing to end them quick if they don't work. I think all that's been good. Um I think also, you know, in in terms of CSDs, I mean look, CSDs are are a market that's going to be difficult to grow volume in the in the kinds of ways that you have in the past. Um I do think though a lot of things they've done to uh maintain pricing power and uh you know uh you know the fact that uh he's allowed the uh you know the the bottling strategy to continue and to flourish, uh especially in the U.S. has been advantageous. So I think he sets the stage well for for Braun to come in now. Uh Braun, he's uh you know, he did our conference in uh 2021 right out of COVID. And uh I found him to be a very personable guy, very easy to talk to. Uh what I hear just you know from people in the company is that uh you know he's well liked, been well received. Uh he's able to kind of uh get down on a personal level with people. Um those are always the kinds of things you know you want to hear from CEOs and the kinds of things that kind of uh help rally the troops as well. So, you know, I think it'll be an interesting couple of years to watch him transition and see what sort of organizational changes he'll make. I expect there'll be some changes in January. Uh, you know, both Coke and Pepsi are working on you know doing some of the kind of restructuring you you have in these kind of different, more difficult consumer environments and uh you know, with pricing growth slowing. So he's gonna have some of that uh to take care of here in the in the coming months and manage through over the next year. So uh it'll be an interesting uh uh year or two. It will be.
SPEAKER_02:I again I think I think everything you said is correct. I agree with you. I think that Quincy basically, you know, if you if you look if you look at the last couple of CEOs, Mutar were Mutar oversaw the refranchising, which was a huge change. Uh Quincy, I think, basically um ran the company and you know there was good stability. I think Coke now is in need of a change agent. And I'm hoping uh that's what Enrique will basically do. Um I think that if 10 years, if if 10 years from now, if 10 years from now Enrique basically has done nothing to change the portfolio, I think Coke's gonna be in a less strong place than than it is today.
SPEAKER_01:So speaking of change agents, PepsiCo has had a bit of uh some leadership changes as well, not at the very top, of course, but in a pretty key role, and that's uh uh PepsiCo Beverages U.S. uh Ram Krishnan, who was just uh on stage with me at FutureSmarts in December, uh, was promoted that very day. In fact, uh as I was on stage, he was uh promoted to the uh CEO for North America. So Steve Williams is moving up uh uh to a broader role. So Ram Krishnan will now be uh in charge of uh North America food and beverage. Um and uh we talked a lot on stage about you know what what's going to happen in terms of how they're trying trying to transform their uh portfolio. We'll get into energy drinks and sports drinks a little later, but any thoughts in general on uh Ram Krishnan and you know what his what he's got in front of him in terms of uh shoring up in part that North America beverage business now?
SPEAKER_02:You know, I think he's got a lot of work to do. Um, you know, as the beverage digest data, the annual data has showed, um Pepsi's North American business is not particularly strong right now. I think Pepsi, which was the number two brand of Coke for years and years and years, if my memory is correct, Dwayne, it's now below both Dr. Pepper and Sprite. Um it's it's Pepsi's flagship brand. Uh Gatorade is not growing. Um and I think that basically they really have to basically take a good hard look at their business and do some very, very, very hard work reinvigorating it. Um they have been losing a share to Coke, and um, you know, it's time for the pendulum to start swinging back toward Pepsi, uh, but they're gonna have to do some work to make that happen.
SPEAKER_01:Yeah, I think uh Pepsi would argue that you know, while brand Pepsi is now behind um Sprite and Dr. Pepper, they look at you know, trademark PepsiCo. They focus more on that because of the zero sugars there. So, okay, great. Um, but that's a portfolio that also needs uh needs some work. Um and you know, Ram Krishnan talked about some of the ways they're gonna do that at the conference, and you know, I think uh it sounds like a good plan. So the question is, you know, what can you invest towards that and how can you execute against that? I think that's what you know he's gonna be uh watching very closely here coming for going forward. And and right now they're under pressure from you know activist investor Elliott Investment Management. Um, you know, some of the pressure is kind of off right now because they've kind of uh got a plan together that Elliott seems to have signed off on uh in terms of how they're gonna proceed. Uh one of the very interesting things that uh Rahm reiterated at the conference was that uh you know a full refranchising is not under consideration. So a full refranchising of the U.S. bottling system is not under consideration. He said they just, when they run the numbers, they just don't see the value creation by doing that, that they're gonna that in essence what they're gonna do is look at it on a more piece-by-piece basis where it makes sense. No real definition as to what that means exactly, like how far they'll go or not. My understanding uh is that Elliott wants a pretty meaningful amount of the system refranchised. Um, but I think they're also giving PepsiCo room to kind of figure that out. So I think there's gonna be a a lot more uh you know activity and discussion around that in the next year or so. But for now, the company is saying don't expect a full refranchising. Is that does that make sense?
SPEAKER_02:Yeah, I mean I think that look, I think it's I think it's be very difficult for Pepsi to do a massive refranchising. It took Coke a long time to do it, and Coke had some very big modelers that wanted more territory, plus, you know, they got new entrants like Reyes. You know, I think that Pepsi basically it would be very hard for them. Um, and but but look let me let me take a step back for a minute. I'd like to know what you think of this. The last time Pepsi basically dealt with an activist investor, it was Nelson Peltz and Try Ann. And what he wanted to do was split the beverage business off from the snack company snack business. I've long believed that a pure play beverage company would be better for Pepsi. That they've got the the the the top management of PepsiCo today is running a beverage business which is basically not growing particularly is not growing very well, and the snack business has run into problems now. In my view, that if they split those two companies up and had good, smart, tough management running the beverage company and separate management running the snacks company, I think there's a good chance that the the the beverage business would do better. What are your thoughts on that?
SPEAKER_01:I think there's no question a focused beverage business would do better. I think what they're looking at is the whole package, and what what they seem to be saying is that when we run the numbers, the value creation by having the two together are greater than what you would get with Frito Lay and the food business separate, and even theoretically an improved beverage business. I I I mean, I don't know. I it's not they're not laying that that math out exactly. Um, so you know, is that I mean, why would you argue that if you didn't have a real belief that that was true? Now you may be wrong. I don't know. But I think that's kind of a separate question than whether if the beverage business was spun off, would it do better? I don't know how it couldn't, frankly. Um it but that doesn't seem to be uh you know where Pepsi's PepsiCo's head is, they seem to be looking at the value creation from both pieces, whether together or separate for investors. Right now, Elliott seems to be giving them room to kind of maintain that thinking. I mean, if you if you think about it, and they're not even they're not even arguing for a split of the beverage business the way Peltz did, they're just saying we franchise a significant portion of it.
SPEAKER_02:Look, you know, I've I've followed PepsiCo for many, many years during the years that I uh I had beverage digest, and they've been they've been trying to figure out how to create synergistic value between the snacks business and the beverage business for many, many, many years. I remember a long time ago, a guy named Al Carey, who many of your podcast listeners will remember, his job was to basically head up power of one and try to figure out um how they could basically create value by having a more synergistic relationship between the the between their two businesses. You know, perhaps I'm being cynical, but I have not seen any success in that in it for in all the years they've been trying to do it.
SPEAKER_01:Well, what's interesting is this also comes at a time when we've seen another major beverage player, KDP, plan a split of their company. So they've got a coffee business and a uh refreshment beverage business driven very heavily by carbonated soft drinks and the Dr. Pepper brand. What they've decided is those now need to be separate. So they're sort of going the opposite way in some ways. Um and uh and they're they're looking to you know have everything poised for a split by the end of 2026. Analysts, you know, have said basically, they think it's gonna be Comel Garchwala at our conference said it, you know, he thinks it's gonna be real tough to get that done before 2027. It's just a very massive undertaking. Um a lot of financial uh management going on there, a lot of stuff, you know, that's uh you know, very heavily uh, you know, Wall Street and bankers and all that. But if we bring it down to the beverage level, the kind of stuff we look at every day, I guess the question is how much disruption are we gonna see uh for this juggernaut Dr. Pepper? How much disruption for the refreshment business? And then on the flip side of that, if you can manage that, do you come out the other end with a more focused business that actually can could go to even greater heights than it is now?
SPEAKER_02:Exactly. I mean, they want they want to be a pure play beverage company like Coke is, and I I think it's I think they're doing exactly the right thing. There are right now two very different businesses. They've got the coffee pod coffee machine business and the refreshment beverage business. And I'm just not sure that's the best model, and I gathered they didn't think so either. So they're gonna end up possibly after some disruption, Dwayne, with a pure play coffee company and a pure play refreshment beverage business. I think that as well as their beverage business has done in recent years, it's got a good chance of doing even better once the split has been executed and the interim disruption is behind them.
SPEAKER_01:Yeah, and I think one thing that's um, you know, maybe not factored in is that some of the reason for this split could have to do with, you know, JAB being a major investor at one point and unwinding that over time and them recouping their investment and seeing some upside. I mean, it feels like um the split at this time is sort of tied up in that as well. So you wonder, okay, is this the natural time to split it, or is it, you know, somewhat not forced, but you know, is the timing exactly where it would have been had you not had the JEB uh factor in all this? So, you know, is that create a more difficult situation to manage, or is this just sort of an inevitability, uh, you know, a practical way of thinking at this time given the competitive environment? Um, I think that's gonna, you know, dictate a lot of how they manage through the disruption. They have a great team. I mean, uh Tim Koufer, you know, uh, you know, I think Wall Street has a lot of faith in him. Um, you know, of course, Bob Gamgourt, who's, you know, I mean, just a veteran of all these sorts of deals, uh, is there as well. So, you know, you you feel like they have a good chance of getting through this and you know, maintaining that refreshment beverage business. Um, they've got a a heck of a you know, uh a CMO now who you know was at our conference, Drew Pinyatu, um, uh, you know, who's doing some really good things on the digital side. So I I think there's a lot of reason to to think they can they can get that beverage side figured out.
SPEAKER_02:I agree with you. I think also Wall Street always worries about disruption. I heard the word disruption 45,000 times when when Coke decided to do the refranchising. And there was some disruption. You know, there's an old saying, you know, life life goes on during alterations, but it might might not always be clean and easy. Um but you know, they're a well managed company, they'll get they'll get through the the split. My guess is they'll go through it pretty well. They've got lots of time to plan for it. And uh as I said, to repeat my Myself, I think that I don't know much about the coffee business. I never really followed that. But I think their refreshment beverage business, which has been doing pretty well, will do even better post-split.
SPEAKER_01:One thing that KDP is doing as well that's been pretty interesting is as you know, last year they terminated uh the rights to the Dr. Pepper franchise for Coca-Cola Rays uh in California, Nevada, some other states. Um that was pretty big news. Now that was very specific to the contract that they had with Rays. It was uh, you know, they they gave them the ability to terminate without cause, which is extremely unusual uh in these kinds of contracts. So I don't know how many uh conclusions you can draw about what they want to do with other KDP franchises. Um, but you know, I put that question to Bob Callan uh at Admiral at our conference, who they carry Dr. Pepper, and he felt very comfortable that his franchise is safe. Other bottlers I've talked to seem to feel comfortable. They don't feel like KDP's gonna come after their franchises. But you know, obviously it's created some consternation.
SPEAKER_02:I think it I think it has created some consternation. Um, you know, I have I happened to talk around the holidays with an old friend who's a coke bottler, and this person's, and we're we're talking about uh uh uh KDP terminating uh Reyes' uh Dr. Pepper franchise, and this bother said, you know, you know, we're all watching that very carefully. And um, you know, it it uh lots of bottlers have lots of different contracts. Um and I think that uh I mean I have two thoughts on this. I think that uh Dr. Pepper is gonna have a struggle in that Southern California market, uh, not being in the Coke system. The Coke system and the Pepsi system have such such huge reach, um, and I think it's gonna I think it's gonna be a struggle for Dr. Pepper in that market. I also think I would not be surprised to see um what KDP, which will I guess will become the Dr. Pepper company, terminate or try to terminate at least a few other cola franchises in the next year or two. I think their calculus is that Dr. Pepper is so strong that in certain markets it can make their other brands much stronger. And I'm sure that was probably their calculus in Southern California.
SPEAKER_01:Because they have scale there already.
SPEAKER_02:Right.
SPEAKER_01:I can't stress enough how um the raise contract was not was was unusual in terms of that ability to terminate without cause. Um so that I think that's a real key factor there. Uh but you know the thought experiment, I mean, you know, some people have raised the question of at a time when when uh people seem to be arguing for PepsiCo to re-franchise its bottling business, you have KDP going the other way and and and and uh bringing their franchise bottlers into a Kobo, a company-owned situation, uh, which seems to be sort of uh, you know, does that why would they be taking such different approaches? But you know, Bob Callan uh from Admiral argued that you know those portfolios are are very different. There's different dynamics about those portfolios and the particular businesses, so it he believes it could entirely make sense for PepsiCo to refranchise and KDP to do what it's doing. But again, we have to stress, I mean, KDP said they want to own you know more uh distribution in general, uh, but they've also been pretty clear that you know where it makes sense, where they already have scale, and they recognize too that the way the contracts are structured many times precludes even you know trying to do that. Um so I don't know that we need to get too exercised about it, but I do think it's something that people are watching really closely. And as you pointed out, it's something that has created a little bit of consternation here and there, and it's still an open question that we'll be watching pretty closely. This episode of The Breeze is brought to you by Ball Corporation, the leading provider of aluminum beverage packaging. As a longtime partner of the beverage industry, Ball helps brands of all sizes navigate change, manage challenges, and unlock growth through reliable supply, strong relationships, and purposeful innovation. From specialty sizes to advanced finishes and graphics, Ball works closely with customers to bring their brands to life and help them stay ahead of evolving consumer demand. Learn more at Ball.com. Speaking of Bob Callan, an admiral from the conference, I also asked him would he want more Pepsi territory, and he said absolutely. So, you know, there's a few bottlers obviously who are uh you know really stumping for territory. Um, and uh, and you know, of course, he thinks that they should refranchise. So let's look, let's turn over to a whole nother issue. You know, obviously the regulatory environment last year was quite eventful. A lot going on, a lot of different issues. Uh Kevin Keene, the uh CEO and president of uh American Beverage, uh, you know, the chief lobbying industry organization for uh Coke and Pepsi and Dr. Pepper and some of the major beverage companies was on stage with me. And we talked through a number of issues going on. One of them is the SNAP program, and and we're now up to, I believe, 18 states that uh eventually ban the purchase of carbonated soft drinks and some other drinks, like energy drinks in some cases, uh by SNAP recipients. So you can't use SNAP funds to purchase those. That all kicks in this year, those bans. Um Nick Modi was on stage and kind of evaluated what that looks like in some of the states. We'll be sharing that in the newsletter. Um, you know, a lot there, but the industry is basically saying, okay, you know, uh they're doing it. Um we think uh, you know, people are still going to purchase these products, they'll just do it from one pocket instead of the other. Um they also point out that these are tests, and they the states have to come back and prove these are pilot projects and interests in essence, and they have to prove to the USDA that they actually accomplished the intended benefits to reduce obesity or you know, cut costs and uh snap spending, etc. They'll have to prove that, and they think that's going to be a really tough sell. Uh, but you know, the question is, you know, how much uh the industry should w needs to worry about that in the next year or so.
SPEAKER_02:Look, I th I think they'll lose some volume. I also I also find I find that I personally find it highly offensive telling people who are recipients of the snap benefits they can't buy soft drinks. Soft drinks are either safe to consume or they're not safe to consume. And if they're safe to consume, everybody should be allowed to drink them. Uh not people, not just people who can afford them and tell people who are getting snap benefits that they can't buy them. I think that is such a wrong-headed position for the gut for the government or any government to take.
SPEAKER_01:Yeah, it I mean it does have a very selective feel to it, um, you know, which the industry has dealt with for years now. Um it's sort of uh an easy one to look at and to uh to target. So uh but you know, one of the interesting things about it is that, you know, the uh political forces that are pushing that now, the Maha, the Make America Healthy Again, uh Secretary Kennedy and you know, within the Trump administration are forces that typically um have been allies of industry and industries like the soft drink industry. So it's been uh quite a change sea change for the industry to figure out how to react to that. And honestly, what they've done is you know pretty interesting in that they've gone right to conservative media. Uh they've gone to organizations like Breitbart and they've taken the case directly to them to say, wait a minute, you know, to your point, John, you you don't want government stepping in and telling you what you cannot can or cannot consume. These are big industries that are American industries that produce their products in America, as Kevin Keene pointed out. Um and these are the kinds of industries you actually want in the U.S. with American jobs, and they've been taking the case directly to there, and you have seen, you have felt some kind of softening there. Uh but again, these bans are being passed in some of these states, especially um uh, you know, uh in in conservative states, um, Republican-led uh states with Republican governors mostly. Um so you know, there's still a battle being waged. All right, John, let's turn to a couple of other categories now besides carbonated soft drinks. Uh, real quick, Costa Coffee. That's you know, Coca-Cola said they want to sell Costa, they've been shopping it around. It's been a tough sell, you know, uh tough environment. Maybe, you know, as you've seen KDP splitting off its coffee business, tough environment for coffee. Uh so far they've not been able to pull it off. Do we think they're gonna sell it this year?
SPEAKER_02:Yeah, I think they'll probably sell it. They won't get the price they want. You know, the the Costa story is a sort of an unfortunate story. You know, I think Quincy basically he came in and he made a big deal out of Coke being the total beverage company. And um Starbucks was doing well. Pepsi had the joint venture with Starbucks. Um and um he they they bought Costa, and you know, I th I thought that was a I thought that was a good move back then. I I know a lot of people disagreed with me, but you gotta take risks, and all risks don't pay off. And um, I don't think they they quite figured out what to do with Costa, how to integrate Costa into their business, so now they're selling it. But you know, that that's life that happens, and uh yeah, they'll probably sell it, they won't get the price they want, and cost will be a uh a chapter in Koch's history.
SPEAKER_01:I I think people forget that the Costa deal was a supply chain deal, you know, for their global coffee business, and you know, COVID just you know dropped a big bomb in the middle of that. You know, it is what it is. Um I I to your point, I agree. We you know, we we used to get the criticism used to be companies like Coca-Cola did not take enough risks, you know, they were too safe. And of course they take a risk and it doesn't work, and you know, uh we want to beat them up. Um so I agree with you. You got to take some risks. Again, if you look at it through the lens of 2019 and before pre-2018 when that deal was done, may it was a supply chain deal as much as anything. Uh it wasn't a retail strategy, it wasn't a retail deal. Uh that was the engine for the broader supply chain. But uh, you know, there was more going on, and you know, it just didn't work for various reasons. So we'll see what happens, whether they're able to offload that now and move on. Uh, but speaking of supply chain, we've got Coke and Pepsi in the U.S. Um have been slowly moving away from uh you know moving away from case pack water and large stores, moving it to the warehouse system from DSD, uh moving it into Niagara. Uh you've got uh uh PepsiCo now moving bubbly into warehouse from DSD, you know, matching the LaCroix, the market leaders model. Um there's been some consternation in the bottling system about whether this is kind of a slippery slope for DSD. You know, these are products that are very commoditized. Um they don't, you know, they're the these are the kind of products that don't have high margins, very low margins, but they do add um uh you know add to scale to your trucks and and help offset some of your operational costs for the higher margin products. So that's a loss for some bottlers. Um but do we think we're gonna see more of this? I mean, are we gonna see more moves of you know, even more significant kinds of products to warehouse from DSD or even hybrids? I mean, I I think you got to believe that there's a lot of thinking uh about that, especially, you know, at PepsiCo, for instance, uh, primarily. Um, you know, maybe KDP in some instances. I don't know. I I just kind of wonder. I don't know that I really have a real clear view on that, but I just feel like there's probably gonna be more and more of that sort of hybridization, perhaps.
SPEAKER_02:I think water is a is is somewhat unique. I think that there were a fair number of coal executives back in the late 1990s who were skeptical about going into water. Um I remember the um the CEO of Cadbury Swept, John Sunderland, said we're not going to bottled water, it's a commodity business. And um I think Coke and Pepsi can play in the premium water business with products like smart water, but I think that um I think that some of the skeptics back in the late 1990s in the industry about the wisdom of Coke and Pepsi going into the water business, I think some of those skeptics were right. It's just it was very hard to brand a product that you could get out of a tap. And um it's i I I think that I think that basically DeSani and Aquafina will be there, though they'll probably continue to lose share. I think smart water will be a suc continue to be a success for Coke. But I just don't think that um the the the the case pack bottled water business was a business that Coke and Pepsi had enough time to develop to develop and brand.
SPEAKER_01:Meanwhile, way back in the day, people always wondered whether energy drinks were a fad and whether that would ever continue. And we've seen that just be you know, that's been a juggernaut for you know 25 years. We had Rodney Sachs uh uh on stage at the conference. We awarded him our visionary award for everything he's done to help build that sector. Uh he's very bullish on energy drinks, and you know, there's a lot of bullishness right now on Wall Street and elsewhere about that uh category after that blip last uh early last year or the year before that it was concerning. It's just come back with a vengeance. Uh, are we gonna see more of that?
SPEAKER_02:I think energy drinks are remarkable. I remember I Beverage I just had a conference in Dallas, Texas back in the uh maybe 1997, 1998, and um maybe 1996, and we invited someone from Red Bull to come and speak, and m people just basically their their eyes glazed over. They just did not see energy drinks as being a potentially big business in the U.S. market. And of course, there everybody was wrong. I mean, energy drinks are a phenomenon, they're gonna get bigger and bigger and bigger, in my view. Uh the the reasons are pretty clear why. And um, you know, I think that Coke has got monster, Pepsi Now's got a good business with Celsius and Alani New. And um these these businesses have lots and lots of runway, in my view.
SPEAKER_01:You know, the other category that I think has been uh, you know, kind of on the opposite side in terms of uh, you know, trying to figure out what to do about it is sports drinks. And uh, you know, I had a conversation with Ram Krishnan from PepsiCo on stage where we discuss sports drinks and you know they're the market leader, PepsiCo with Gatorade, and uh they believe that they need to get back to talking about the science and the efficacy of the product and basically reintroduce a new generation of people to why you would even drink sports drinks, and uh and they believe that's a lot of the issue. I think that's you know, there's some debate about you know whether that's the extent to which that's gonna uh you know uh return that category back to growth. Uh rapid hydration products are the ones, you know, the electrolytes, the gator lights, the uh body armor flash IVs, those are the part of the sports strength market that are growing and they do add additional functionality. So, you know, do you have to so I think what PepsiCo is saying is let's go back and make sure people understand the functionality and the science behind the core brands as well, and they think that could help uplift um that brand, uh the core brands too, maybe additional messaging on the bottles. Uh power ahead at PowerHate's had some success talking about 50% more uh electrolytes and really pushing that functional value add. Um what do you think, John? Are we going to be able to see some sort of um you know meaningful growth out of this category in the next couple of years?
SPEAKER_02:I think I think PepsiCo's 100% right. I think that the reason sports drinks grew um from that uh football stadium in Florida many years ago is because they were and are a functional beverage. And I think that if you try to market them as refreshment beverages, uh, you know, soft drinks with a maybe a hint of function, it's not going to work. And I think that basically, Pepsi's absolutely right. Gatorade is a brand which I think is a fantastic brand, a powerful brand. It should be it should be growing and performing better. And I think they, if they can basically get back to convincing consumers that Gatorade really provides functional benefits and market that, that they will see Gatorade return to growth. And I think if they do that, it'll probably pull PowerAid along with it.
SPEAKER_01:I think that's a great place to end it, John. That's it's been fun, as always, running through uh the big stories of 2025 and casting forward to what it's all gonna mean in 2026, and uh look forward to uh some more fun episodes this season.
SPEAKER_00:Good being with you, Dwayne. Take care and happy new year again. The breeze is produced by Beverage Digest. Visit our website to learn more about our products and subscribe to our newsletter. That's www.beverage digest.com.