Episode 32: What Does Beverage Digest's Fact Book Say About Consumer Demand?

John Sicher turns the tables on Beverage Digest Editor & Publisher Duane Stanford to interview him about Beverage Digest’s newly-released Fact Book  31st Edition.

They trade notes on what the data says about where U.S. beverage demand is actually going.

They dig into:
• Why total LRB volume turns negative, why energy keeps winning, and why per capita CSD per capita consumption is the number that industry insiders should we watching most closely.
• How Fuze Tea’s staying power in Spain is a reminder that so-called “failed” U.S. brands can thrive globally
• Inflation, premium trade-offs, and why volume can fall while dollars rise
• The case for tap water and refillables as a hidden volume competitor
• Carbonated soft drink volume decline vs revenue growth management reality
• Zero sugar soda growth as a proxy for shifting artificial sweetener sentiment
• Why prebiotic soda and “modern soda” create a gateway back to fizz
• Energy drinks as a new, distinct use case in QSRs and why chains like McDonald’s want beverage traffic
• Cola share erosion, more options, and the challenge of rebuilding demand
• Sports drink growth stalling and the need to re-explain “better than water”

If you're interested in Beverage Digest’s newly-released statistical yearbook of the U.S. packaged beverage industry, visit https://www.beverage-digest.com/factbook to buy and download immediately.

Transcript

Welcome And Fuse Tea Surprise

SPEAKER_01 0:07

This is the breeze. I'm your host, Dwayne Stamper, 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 by industry expert John Stitcher, who is a former editor and publisher of Beverage Digest, and in recent years has consulted for companies ranging from Coca-Cola to Pure Circle. John, how are you doing this morning? Dwayne, very well.

SPEAKER_00 0:39

Good to be with you again.

SPEAKER_01 0:41

So uh so Laura and I spent the last it's been about 10 days in early April driving through the south of Spain. And it's I was floored by one thing, and that was a lot of things really, but one thing in the beverage world, because you know, on these trips, as you remember uh doing, and you probably do now, you're kind of looking out, seeing what's in coolers, seeing what people are drinking in cafes, et cetera. And I was floored by the amount of fused tea that I saw there. Now, if you're you'll probably remember this is a brand that uh was discontinued in the U.S. in 2018. Uh it was still existed overseas. Coke cut it from a few more markets uh just a few years ago. Uh, but there's some European countries where, you know, they said at the time we're going to continue to sell it where it does really well really well. And Spain is apparently one of those because I saw it in shop coolers, at groceries, I saw it on menus. I was even at a bar, Laura and I were at a bar one night, and there were some guys they were drinking and drinking fused tea, drinking alcohol, and it seemed like some of them were even mixing alcohol with fused tea. I don't know what that's all about. Uh, but uh, you know, I was just shocked by how much fused tea. And I'm sure you remember back when that was acquired because I think you were running Beverage Digest at the time.

SPEAKER_00 1:52

I I remember it well. I'm glad to hear it still uh has such a wide distribution over in Spain. I mean it was a good brand, product tastes good. It had not to be overly uh clever, it had somewhat of a short fuse in America. Um but um you know it was a good it was a good brand, and I think that um I think what happened here was uh, you know, Lipton and Arizona were just too big and too powerful. The tea category in the U.S. stopped growing. Coke's got a nice brand in Cold Peak, and I don't think there was room for fuse over here.

SPEAKER_01 2:28

Yeah, that's exactly right. It was I remember, you know, it was pretty early in me covering beverages, uh covering this industry. I was at the Atlanta Journal Constitution Constitution at the time covering Coke and Pepsi, and uh that was one of the first big deals that happened around that time that uh that I covered. And uh so it was kind of interesting years later to see that kind of unwind as the whole tea market just kind of went in a whole nother direction, as you pointed out.

SPEAKER_00 2:54

But it's interesting, it's interesting, Dwayne, in that you know, I think a lot of us, me included, take a somewhat of a myopic view of Coke and maybe Pepsi acquisitions, where if a product, if a if a if if if a deal, if a deal for a brand doesn't work in the North American market, we look at it as a failure. But sometimes we fail to look at what the implications might be in other markets around the world. So given what you've mentioned about Fuse in Spain, my guess is that that acquisition is probably successful for them, even though it doesn't have any presence in North America anymore.

SPEAKER_01 3:32

I think it's a great point. And you know, as it happens, you know, these big global conglomerates, when certain categories go in certain directions in specific markets, it doesn't necessarily mean that's happening in all markets. And you know, they optimize, and uh, you know, if it's doing well in a few markets, focus on that. Leave the resources and attention in other markets for the things that people are drinking. Uh and who knows, you know, if tea, if there's some kind of change in tea here, you could always bring it back. So I I think you're exactly right. A lot of times we kind of forget that when Coke buys a brand, I I would say always, or at least mostly always, they have plans to take it into other markets as well when they buy a U.S. brand. Uh and you know, of course, you see that with PepsiCo and Poppy right now, and then the same thing with them. They bought Poppy and they're expanding that into other parts of the world, seeing if they could sort of light the prebiotic fuse in other markets and or serve markets that are, you know, already kind of gravitating to that kind of thing. So it's a great point.

SPEAKER_00 4:29

So I see I see you're joining me in punning this morning. The prebiotic fuse.

Why Global Brands Outlive U.S. Failures

SPEAKER_01 4:37

Yes. Not intended, but I like it. I'm channeling John Sitcher. Uh so you know, while we were in Spain, John, Laura and I uh had the privilege of uh publishing the 31st annual edition of the Factbook, and this is our annual review of data from the previous year, and this is the this is the all-channel look. So this is uh in essence, uh uh shows all brands, estimates all brands and categories and companies in the biggest categories in LRB from an all-channel perspective. So this not only includes, as you well know, uh retail channels like groceries and convenience and the like, but it also includes the fountain channels, so you can get a look, for instance, how much Coke and how much Pepsi and how much Dr. Pepper sold across the entire U.S. market uh in the previous year. And we also, you know, it's got historical data going back to the 80s. Uh so great product, people really love it. So we were in a hotel in Granada, Spain, putting out this fact book, and uh I think you probably well remember what it's like to uh get that beast out and uh do the work to pull those numbers together.

SPEAKER_00 5:46

It's a lot of work, and I can tell you, Duane, I enjoy it even more now that you're doing it. Um but you know it's a terrific resource, and one thing you've done with the fact book, which I which is a terrific idea, is you along with the pat the factbook, you publish a separate Excel data sheet, which makes it a really, really useful tool for anybody who wants to do an analysis of the data. And uh, you know, I think that the fact book this year is terrific. I think the data sheet's terrific, and my hat's off to you for the good work you've done on this.

SPEAKER_01 6:18

I tell you what, we've got a crack team, Lena, Zikis, and uh uh Trip Stanford. I tell you, they've uh they've really uh done some amazing things with that database. We've got an excellent methodology, just kind of uh, you know, improving on all the amazing work that you and your team did back in the day. And uh they've really you know created some automation around the production of that. It's been you know just not to talk too much inside shop, but that book is so important, and um uh the work they've done on it has just made it a better and better product. So uh very excited about it, and we were happy to get it out again this year, and uh and uh in time for people to to take a look and use it for their models and such. But one thing we were gonna do today, John, is that we wanted to dive into the data from 2025, dive into the fact book and and uh see what strikes us about the current state of the U.S. ready-to-drink beverage market.

SPEAKER_00 7:13

Exactly. You know, I took um I took a look at the fact book uh and the data sheets, and a bunch of things uh jumped out at me. I I wrote down five or six different uh areas to talk about, and maybe I thought maybe if it's okay with you, maybe we turn the tables a little bit today. I mean, you spend your life now interviewing people for uh stories and data acquisition in the fact book. Maybe today um I'll mention a few things that jumped out from me from the factbook, and I'll interview you a little bit and ask you what they mean, what you think of it, uh what the implications are, what the future implications are. Is that is that okay with you?

Factbook Data And 2025 Market Lens

SPEAKER_01 7:53

Absolutely. Yeah, I've been uh in the thick of planning for uh uh uh speaking at the uh BevTech conference, uh conference of uh beverage technologists uh next week. So been uh deep in analysis mode. So yeah, let's do that. That sounds fun, John.

SPEAKER_00 8:08

So let's start with LRBs. Uh, LRBs are uh is a is a um the aggregate of all the major categories that uh beverage digest uh um covers, and the you know the two biggest categories are CSDs and water. So in 2025, LRBs volume was down 0.9 percent, CSDs were down a bit, water was down a bit, only the smaller volume category, energy was up in volume. So I remember talking to a coal executive probably somewhere maybe around 2010-2012, talking about the the industry, and what he said to me was that he anticipated that probably CSDs would be down or flat for many years to come, but he thought that LRBs would be would be consistently up in the three to four percent range, three to four percent range in volume. So last year LRBs were down 0.9 percent. Uh what do you think this means, Duane? Where why have LRBs turned negative? Where is the volume going? I mean, is it is it is it going to tap water? But basically, why do you think LRBs are the as I mentioned, the only category that was up was energy, which means since it's a small volume category, the volume for LRBs was down. What do you think is going on there?

SPEAKER_01 9:31

I mean, you do have a few things going on this year. I mean, we've had a few years of inflation now, so you gotta believe people are cutting back, and there's you know plenty of evidence that people are cutting back some of their spend at grocery, and you know, you're gonna cut back on certain, especially the you know, the more premium side of beverages. Um I I do think, you know, it's an interesting thing having an alcohol. There's a lot of debate about the extent to which are people really cutting back on drinking, or are they just being more selective in what they purchase, maybe drinking less volume, but really still spending on more of the kind of RTDs and premium brands that they really love. You probably have some of that happening in beverages as well. I mean, with energy drinks, one of the some of the commentary we've heard over the last year or so is that even in 2024 when the energy drink category was running through a little bit of a sluggish period, a lot of what you heard is that people were not necessarily stopping drinking energy drinks. They were drinking maybe less during the week. Um, but but you might also have a situation now where people are maybe drinking less volume across a number of beverages and just but they gotta have their Celsius, they gotta have their monster in the morning, and they kind of tailor their spending to that. Um so you know they may be drinking less LRBs, and what they are spending is still on things like energy drink, and so that's caused a little bit of this uh LRB decline as well. And then you also have uh bottled water, the the big uh companies have kind of uh are de-emphasizing case pack water. Uh so you see water down here because they're just really not leaning into that anymore, and that's a good bit of volume as well, because of course the numbers we're looking at here are volume. And if you look at some of the dollar values for some of these categories, they may be up whereas the volume is down.

SPEAKER_00 11:18

Right. Anecdotally, I mean I mean, we've talked about this before, but at least in New York City, you cannot walk around the streets of New York without seeing many people carrying these re refillable water bottles. And uh it's my belief anecdotally. I certainly have not seen ever seen any good data on volume changes in tap water. But my I am I am guessing if I look at the numbers in the fact book this year, that some of this volume migration simply has to be going to tap water and people using tap water to refill these refillable water water containers.

Why Total LRB Volume Turned Down

SPEAKER_01 11:56

Yeah, absolutely. That's absolutely true. I mean, if you even just where I work out at the gym, they've got these uh, you know, water, they have regular water fountains and the type that you can refill a bottle with, and they're all over the place, and you see them everywhere, and more of them popping up. Um so you know, and yeah, you see people carrying these bottles, especially younger generation. Uh, but even you know, even some of the Gen Xers, you see them carrying carrying around these metal bottles, they're kind of a fashion statement, too. Uh so if you if you think it's kind of cool to have one of those and you got don't want to carry it around and not put something in it, so exactly.

SPEAKER_00 12:33

So let's let's jump to the next category that I was looking at, which is our the biggest category, the granddaddy of the business, which is carbonated soft drink. So um the category turned negative in volume around 2000, and carbonated soft drink volume has been down almost every year for the past uh 25 years. And according to your data, Dwayne, last year it was about 7.4 billion billion cases. Back in 2000, it was 10 billion cases. So it's lost uh somewhere around just short of 3 billion cases in about 25 years. Um you know, if that if every 25 years this category loses three to three or three billion cases, in 50 years or so, there's not going to be much left of the carbonated soft drink business. So, so you know, you and I have talked about this a lot. Yes, they've been able to get pricing and they've been able to get some revenue increases from carbonated soft drinks, but volume is down, down, down, down, and that's got lots of implications. I remember a Coke bottler once telling me that yes, pricing is up, but the days that that that people are not gonna pay more for smaller packaging forever, and he he made a joke, he said no one's gonna pay five dollars for a thimble full of coke. Um we're certainly not there yet. But you know, again, this category has lost about the 25 or 30 percent of its volume in the last 25 years. It doesn't show any signs of the volume turning around. So is Dwayne, is this a permanently dying category in terms of volume, or do you see any signs or any any glimmer that the big companies, Coke, Pepsi, and and uh and and Curie Dr. Pepper, soon to be Dr. Pepper, can turn this around and stabilize the volume decreases and get volume growing again. It's I mean, to me, they have to figure out some way to do that.

CSD Decline And Pricing Limits

SPEAKER_01 14:43

Yeah, uh, you know, I'm probably not as pessimistic on that front. Um I think you know they have stabilized some of those declines over the years since those earlier days. Um I was talking to an industry expert recently um who's been in the industry many, many years and um uh you know, retired from the industry now, but you know, they point out given the volume declines, the revenue growth management, especially at a company like Coca-Cola, is almost magical. I mean, they have uh I mean it it really is a testament to that revenue growth management model in terms of how they're able to continually uh grow dollar sales around these products despite the fact that fewer people are drinking it. But as you point out, that can't last forever. Um you at some point, uh I think that the tools are so new and advancing and getting so much better that you almost, especially at public companies where you're judged by the quarter, quarter, you almost like can't do anything but chase that revenue because you put dollars in the bank, as they say. I think the fear and the danger is, as you point out, is that if you don't pay enough attention to the demand side, or if you pay attention to it and you miss out on what the real drivers are, and or it's so fragmented that you can't really drive the same kind of value gains that you did before, uh, then you're moving into a dangerous area because you can't raise prices on zero. Um but then the question is, you know, to what extent can you bring in other products that fill out your portfolio? Uh, but how do you do that while still making sure you don't throw the baby out with the bathwater with your big, huge revenue driver and profitable driver, like uh, you know, these big flagship carbonated soft drinks? Uh so I think that's the dilemma going forward in the next few years. And I think, you know, part of the CSD numbers are also probably impacted by the fact that PepsiCo has made a uh a focused uh decision over the last 15 years to really prioritize things like Gatorade and some of the non-carbs, and and they've um they haven't invested at the same rate as other companies in their carbonated soft drink portfolio, making a bet on the future. Um and so there's been a good bit of erosion that's come from that as well that's made that number. If you look at a company like Coke, the picture doesn't look as bad. Uh but you know, across the board, as they always say, uh carbonated so you know, with the carbonated soft drink, um if there's more competition and you're uh getting more people to drink, then all boats rise, and that's good for the industry. Um and so you know it'd be important to kind of get be get back to that at some point if you want to stem these uh volume declines as well. Coca-Cola reported earnings this week, and they, you know, they've got a situation now where their uh volume actually kind of outpaced their pricing, but that's because you know people are just kind of almost hitting a wall on how much more they'll pay for these products. So that tells me you really need to kind of lean back into that demand side and figure out, okay, what is gonna drive people to have an affinity for these products again? And it's a very tough, fragmented, fickle environment to do that. So I think it's just gonna, they're gonna be earning their money if they figure that out. 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.

SPEAKER_00 18:35

Let's drill down a little bit a little bit more before we leave carbonated soft drinks. I mean, looking at your looking at your data, um the Xero products are doing pretty well. Coke zero sugar, Pepsi, Pepsi Zero sugar are doing pretty well. Um the sugar products or the full calorie products are not doing so well. Um I remember many years ago there was um there was a very high level of concern about the um the non-caloric sweeteners, um, mainly aspartame. But again, uh pep Coke Zero Sugar and Pepsi Zero Sugar are doing very well right now. Diet Coke. I mean, excuse me?

SPEAKER_01 19:18

Diet Coke.

SPEAKER_00 19:19

And diet diet coke also. So where where does the sentiment lie today in your view on sugar and the so-called diet sweeteners? Um if you just look at the data, you have to say to yourself, there's still a concern about sugar, but maybe the concern that I use I wrote about a decade or two ago on the diet sweeteners, maybe that has uh decreased. Maybe there's less of a concern about that. What are your thoughts about that?

SPEAKER_01 19:50

I got two thoughts. One, I think Diet Coke is a real proxy for how people are feeling broadly about uh artificial sweeteners. Um Diet Coke is a brand that was in decline for many years, and you know, we viewed it as a managed decline, and now you've seen that uh now uh growing. Um younger consumers are discovering it, it's very hot on social media, lots of iterations, celebrities are talking about it. I think the fact that you see that brand now growing and you know, posting good results uh uh it's gotta be a proxy for how people are the sentiment around things like aspartame. Uh Coke Zero, you know, it uses uh some of these sweet, it's got a sweetener system that's a little more complex, a little sweeter, a little more like sugar, uh, but you know, it's using those sorts of sweeteners as well. So yeah, I gotta believe that that that that some of the uh negative sentiment about around that has calmed down. My hope is that people have just done more research and understand those sweeteners better. That would be my hope. I I don't know exactly if that's the case, but you know, uh typically when you have a narrative that says those things are bad, at some point you're gonna have a counter-narrative, people are gonna start to question that. So maybe some of that's happening. Um, or we've just moved on to other things that are uh, you know, uh whether it be PET within the beverage industry or just the economy, inflation, you know. I always think these are always at risk of coming back, so you really need to make sure you're paying attention, you're educating consumers and doing all those things. You can't forget about that, uh, because it could it could come back and rear its ugly head. Sugar, I think, you know, because of uh largely because of how the companies have positioned their portfolios and how they talk about sugar and permissibility and things like that have really kind of calmed a lot of that down, too. I think consumers generally want to uh uh limit their sugar intake to levels that they believe uh personally for them are more are reasonable. Um and I do think we've got a younger culture now that is not all or nothing. I think that's very important. They're willing to indulge, but then they pick their shot. And then they uh cut back sugar on things where it makes sense and then save the sugar for a cocktail or for a ready-to-drink uh product. Um, or sometimes they want a zero sugar in that as well. So I think that also kind of tamps down some of the sort of the heightened rhetoric around sugar, even that we saw, you know, back when you had beverage digest, and in that period, even after I started covering the industry.

SPEAKER_00 22:27

I mean, I made a pro I made a prediction a long time ago. Excuse me. I think I've mentioned this before. I made a prediction a long time ago when the um concerns about obesity and diabetes diabetes started that that the sugar, the full calorie uh carbonated soft drinks would decline, but the diets would grow and grow and grow, and as they got bigger and bigger and bigger, they would re-lift the category to gr to to growth from from its from its steady decline now. And I was looking at your fact book. Back in 2000, the diet share of the category was about 24, it's now closer to about 30. So diets are gaining share. Um, but do you think that that we're gonna see given given basically what we're seeing now, the performance of diet diet coke, Coke Zero, Pepsi, Pepsi Zero, do you think these these diet drinks will continue to grow and eventually begin to add some more to if if not add, you know, create growth in the category, at least strengthen the performance of the category?

SPEAKER_01 23:37

I mean, I suspect the uh you know the executives at the major uh carbonated soft drink companies would like nothing more than to flipped flip that percentage to you know more low and no sugar, zero sugar uh than sugar versions, while they even still keep the maybe even the focus on that those big flagship uh Halo brands. Um so yeah, I I think it still continues to grow from now. I I also think this is a very dynamic environment, lots of new things coming online, uh trends change. Uh, you know, as sure as you get this trend now towards uh diets and uh zero sugars, you know, at some point the next generation comes on and wants to do something different from their parents, and they have a much bigger uh bullhorn uh to talk about that and to influence others to do the same. Uh so I think these uh patterns, you know, these kind of up and down patterns are just magnified because of this, the whole culture around social media. So I think you could see that change over a couple of quick years too at some point. But um, you know, in general, I think people uh also are paying a lot more attention to all the functional and health and wellness beverages and paying attention to more of the ingredients. I see a lot more questioning in the discourse about okay, is that really so much healthier? Um, so there's a lot of dialogue around that that um unfortunately can create a lot of confusion for consumers, and you hope they don't just throw their hands up and just go to top water. Uh, but it also could dilute the uh demonization of certain specific types of products or categories or brands. Uh, you know, so maybe you you can have a dialogue that's kind of more uh uh balanced and nuanced, and uh, you know, maybe uh those are yeah, that's just some of the general thoughts I have about it.

Prebiotic Soda And Modern Soda Sets

SPEAKER_00 25:24

What do you what's your some before we move on to uh energy, uh which is many ways is a functional carbonated soft drink, what about poppy and olipop? Uh are they the real deal? Are they continuing to grow? Uh are prebiotics going to be a significant uh segment in the carbonated soft drink business in the years to come, or do you think they're gonna flame out, Dwayne?

SPEAKER_01 25:47

I don't see them flaming out. Um I think there's I think they've proven there's a market for that. There's a segment. Um it's uh you know, it's a fraction of what the overall carbonated soft drink market is. Um I think what it's done is it's created a gateway for a lot of new, you know, what Walmart called modern soda brands. So you even have like the OG Zevia that's uh you know now on a shelf with things like Poppy at Walmart or you know, during their modern soda set. Then you have a lot of new players coming in with uh with drinks that are marketed and act the way Poppy did, but not necessarily with prebiotic functionality, maybe just better-for-you ingredient profiles, different, you know, more uh you know, cleaned up ingredient profiles, less artificials and the like. So it's opened up this whole new segment of these kind of better for you sodas, which still in aggregate are um you know a fraction of what the full carbonated soft drink market is that's in this big, massive scaled systems. But they're premium, um, they're uh consumers really like them, they create a lot of energy around the category. Uh so I guess the trick is okay, if you're the big soft drink companies, how do you sort of embrace that category in a way that that views it as maybe even a gateway to uh Diet Coke or other products too, um without you know necessarily pushing back on it in a way that kind of hurts the category because you know it's people interested in bubbles and fizz and flavor and sweetness again. And that's another key point, is I think what this has done is it's opened up the dialogue. There was that period where we went through carbonated sparkling water, the LaCroix period, uh, and bubbly and aha, and everyone is drinking that. But the the problem to me with that always was that people like sweet and they like flavor. And I don't know how long they're gonna be fine with something that's lightly essenced. They're gonna want other things too. And so this poppy uh dynamic has opened up this whole nother realm of flavor and and uh taste, some functionality it's in some cases, uh, but kind of the fun of soft drinks again. So I I can't think but that's good for the category as a whole.

Energy Drinks Keep Compounding

SPEAKER_00 27:59

Right. So let's talk about energy drinks. We could probably talk about energy drinks for the next three hours, but let's not do that today. Umergy drinks back in 2000. Again, I was looking at your data. Back in 2000, energy drink volume was barely anything. And in your data in 2025, energy drinks were 870 million cases, uh, you know, just really shy of a billion cases. Of course, in dollars, because they're a premium price, they are much, much, much more important uh in dollars than they are in volume. But you know, with the exception of the financial crisis back in 2008, energy drinks have just been growing and growing and growing for the last 25 years. And the the two dominant players are Monster and Red Bull. Um is this, you know, is does this go on forever? I mean, I I don't I mean, I I was skeptical many years ago of the long-term growth of energy drinks. I guess I was probably skeptical because I I didn't see many new products growing long term. I saw a lot of new products coming on the market and growing for a few years and then leveling out. But the energy drinks are a different a whole different uh story. I mean, they just keep growing every year. There's good solid growth there. And uh so you know, put on your um your your fortune teller cap, Dwayne. I mean, are we gonna be still talking about the growth of energy drinks ten years from now, five years from now?

SPEAKER_01 29:41

I mean, I've made this point before, and I think you remember we had a lot of discussions around that when I uh took over beverage digest too, and that's that I always there was a period where I really viewed energy drinks as just the new carbonated soft drink, you know, um, that it has a lot of the same functionality that carbonated soft drinks used to, you know, pitch. You know, it was uh energy boost in the afternoon, it had some caffeine, you know, albeit you know, a fourth or or a fifth of the caffeine that you would have in a an energy drink these days. Um but it had a lot of that same refreshment functionality, evening burst and uh uh energy drinks came along, and they were just kind of a modern, more modern version of carbonated soft drinks. Um and um and so and and uh there was, I'm with you, there was always this feeling that, okay, we'll see how long it lasts, you know. Um and man, it's been a juggernaut. Uh and I think um I I think I still believe that, that it's kind of a a new modern carbonated soft drink, but but I also my thinking's changed a little bit in that I do think it's a very specific, uh a different use case, uh need state, as they say. Uh it is fully formed into its own category. I think there are consumers who cross over between them, but I think there's a lot of consumers who just drink one or the other and they don't cross over, honestly.

SPEAKER_00 31:03

You know, I was fat I was I was fascinated by your recent story, and I think also one in the Wall Street Journal about McDonald's starting to uh serve a Red Bull energy drink. I mean, I always basically I always thought that the the beverages that we saw for sale in restaurants, uh all restaurants, but mainly the you know the mainly McDonald's, Burger King, Wendy's, et cetera, were beverages that go well with food. And I don't I don't usually think of an energy drink as a beverage that goes well with food. I think see that as something that uh you pick up in a convenience store for an energy booster in the day, but not something you have with your burger and fries. So what do you make of uh McDonald's now beginning to sell a Red Bull product? What is that all about, do you think, Duane?

SPEAKER_01 31:55

I mean, I think that's exactly the point. It's not necessarily a beverage to go with food. They are trying to be a beverage destination for the sake of beverage. Um, you've seen some stories out there talking about, you know, a lot of this is in competition with Starbucks. I mean, 70 something percent of their uh their sales, Starbucks now are cold beverages. Young people like cold beverages, not just cold coffee, but or iced coffee or cold brew, but you know, these refresher drinks, which are basically like uh dirty sodas or flavored up uh sodas or sparkling waters or juices. Um and so McDonald's is trying to be a destination for that too. So I think they're perfectly, I mean, obviously they want someone to come in for a refresher and grab a hamburger or some fries or a salad, whatever. They want that. Uh that's the that's the ultimate win. But they are perfectly pleased if someone bypasses Starbucks and decides to drop through McDonald's because there's a uh Red Bull, you know, berry refresher uh that gives them that that brand that they want, but in that refresher format, they'd be perfectly happy with that. So I think you have a two sort of two things happening now. You still have the very important cola with food dynamic when it comes to a restaurant like McDonald's and and QSRs in general, but then you have this separate track, which is refreshment beverages for the sake of these refreshment fun, Instagrammable, talk-worthy beverages.

SPEAKER_00 33:22

So, Duane, last year uh Brand Coke ran into some uh issues after that really unfortunate, unfair hoax story about uh uh about ice uh and a and a coke plant. And that there are a bunch of a bunch of months and I saw in the syndicated data that um Coke was really struggling, brand coke was struggling with volume. Uh Pepsi outperformed Coke last year in your data, if my memory is correct. Um is brand brand coke recovering from that now? It the last few uh pieces of syndicated data I've seen indicate that Brand Coke is regaining its momentum. What what's your what's your sense of that?

SPEAKER_01 34:05

Peter Peter Peter Peter Peter Peter Peter Peter Peter Peter Peter Yeah, I mean that's it seems like through the course of last year it was uh getting its legs back. I mean it was quite a a shock uh the the decline due to that, you know, the hoax and also just Hispanic consumers hunkering down in certain parts of the country with all the uh the immigration uh efforts um with the immigration crackdown. Uh so that seems to be smoothing out now, but you know, they're I think they're still kind of pulling out of that, but have largely uh moved through it, best we can tell.

SPEAKER_00 34:36

So, but when I when I many years ago, there there was a there was a term that was uh used in the industry, people were worried about what they called cola fatigue. And back in 2000, the coal, the cola segment of the business had a 60 share of carbonated soft drinks. In the data in your new fact book, colas are down to a 49.4 share. So colas have gone from a 60 share of the business to less than a half share of the business. Um I'd call that cola distress. What do you think? What do you think is going on here? Is there is there an issue with colas or have some of the other products like the peppers simply been marketed better and outperformed? What do you think is going on with the cola segment?

Sports Drinks Hit A Wall

SPEAKER_01 35:23

I really I actually the last few years I've been encouraged in terms of the cola segment. Um I think people like cola and I think they like carbonated soft drinks. And you know, you just look at Diet Coke as an example. Um, you know, the way that people talk about that on social media is just like uh, you know, a coke marketer's dream. Um but I but uh you know I do think there's just so many more options out there. You've got a certain amount of consumers that don't want artificial sweet, and there's a certain amount that don't want sugar, so they're gonna be out of cola. So that's gonna some of that 60 is gonna be whittled right there. They've got uh all these, you know, everything from poppy to lots of different functional waters and beverages that are just very social media forward, uh, grab people's attention and give them a reason to be outside of that category. I mean, that back in the time when it had such huge shares, I mean, there weren't tons of options. I mean, those were the days when, you know, moms brought uh carbonated soft drinks to the little league field, you know. When I was coming up with my kids, I mean, I'd have been run out of there if I brought soft drinks onto a onto a ball field after a game. Um, you know, so you know, a certain amount of that share has gone there. But I almost feel like there's been, especially since COVID, when everybody hunkered down and were just buying stuff and trying to make themselves feel good and buying carbonated soft drinks again, whatever. I feel like there's been this bit of a renaissance around just how people think about those drinks and and the fact that they really love bubbles and carbonation. And that's one of the reasons Poppy was so successful, is because they were able to tap into that, but still tap into the to the soda love for soda and bubbles and carbonation and flavor and sweetness at the same time that they gave a permissible reason to do it if you had as a consumer barriers to that permissibility. So that was part of the magic there, I think.

SPEAKER_00 37:11

Um let's talk about sports drinks for a minute. Um I remember back 25 probably 25 years or so ago when um Coke was gonna buy Quaker oats, they didn't, PepsiCo did buy Quaker Oats, Gatorade was really the prize. Uh Gatorade was viewed as a product which is sort of the perfect the perfect beverage product for the in the uh in the context of the times. It was a functional product, tasted pretty good, relatively low in calories. Back in 2000, the sports drink category, according to your data, Duane, was 400 million cases. Now it's 1.3 billion cases. However, growth stopped a few years ago. What's going on with sports drinks? Is it still, is it a concern about sugar? Is it a migration to energy drinks, a migration back to tap water? Why has energy, I mean, again, sports drinks I I would have thought would be a product that would get given that it's functional, it's relatively low in sugar, it tastes good. Certainly they're big brands that are marketed well. Why, why have this why has sports drinks somewhat hit a wall in terms of volume growth?

SPEAKER_01 38:26

Well, I mean, I'll start with Gatorade. You know, Gatorade is the market leader, uh, you know, 60 almost to 70 share of the sports drink market. Uh a lot of that is driven by the fact that that brand's been kind of uh, you know, lackluster uh in recent years. Um and they what they've diagnosed, at least, um is that uh the consumers have uh gotten away from understanding why sports drinks are better than water. Um and so they they believe the uh the the path to growth is to remind consumers uh the various ways in which it's better than water for various uh functions, whether it be everything from extreme exercise to just daily uh exercise living exercise. Uh so that's the approach they're taking. I think that it is true from what I see out in the discourse, I think you've start had this building narrative that, and I'm sure this is what PepsiCo has seen as well, this building narrative of like questioning, okay, are soft drinks really better than are sports drinks really better than water? Am I just spending a bunch of money on something that's not really giving me that much benefit? Does anybody other than an extreme endurance athlete really need sports drinks? There's a lot of discussion on social media about this. A lot of dietitians that are using that as part of it. It's just a very it's a sexy topic, you know, and there's and it's a legitimate topic. I mean it should I pay more? I could go to the tap and hydrate myself, or I can pay X amount more for something that purports to be better than that. Do I believe that? Is there science to back it? And at some point, do I really need that much more efficacy when I can just drink tap water? I mean, there's a lot of questions about that. I think they've rightfully identified that they need to weigh back in in a big way and and and and make the case for why they think in certain situations electrolytes are better for hydration than water and not just for heavy sporting occasions, but even just like with propel and you know uh fitness lighter fitness routines. And now with this longer lasting product that has some ingredients that are supposed to keep you hydrated for longer with less liquid, uh even just staying hydrated in a day for certain types of jobs or activities, they want to they want to sort of add that into the mix too. So we'll see how it works. But I I think there's some work to do there for that category for sure.

SPEAKER_00 40:53

And in terms of my questions, I'll uh I'll close with maybe it's a question, maybe it's a commentary, but um you and I have talked about this a lot. My own particular deepest area of concern for the beverage business, which I think that is not adequately covered by some of the analysts, or the is uh per caps, and it's it's it's covered well in the fact book. Let me just give you a number. Back in the early 2000s, uh the per capita consumption of carbonated soft drinks was 850 servings a year. And you and according to your fact book, it's uh now down to about 550. So what that means is that as as volume has decreased over the over the last 20, 25 years and the US population has grown, what that means is that the average American instead of drinking 850 servings a year, is now drinking 550 servings a year. To me, that of all the numbers that that this industry talks about, that number is of greatest concern and does not get enough discussion. Well, let me throw that back at you. I mean, do you think that that's well understood? Do you think that people focus on that enough?

SPEAKER_01 42:11

No, I don't. I think you're exactly right. That is the most troubling number of all because of the fact it takes into consideration that that uh population growth. I mean, at a minimum, you should be at least tracking with population growth. Uh so yeah, that that points to something that definitely needs to be addressed. And um, you know, the the one thing I think about is okay, is this understood? And and nobody wants to say it, but are you in essence managing a decline that you're not going to be able to avoid because of all the reasons we've talked about fragmentation, where consumers are, et cetera? Um, or do you believe that there is a way to to to make those per caps go the other way? Um and if you are in a situation where you know you're facing reality, uh, and the solution is to um basically make sure you broaden your portfolio to bring in other types of beverages to offset some of that, uh, and to maximize the revenue potential that you can get from this even as it's declining on that volume basis. Um I mean, you have to believe all the actions there say that there must be some general belief that some of this is inevitable, and you just do the best you can and and and hope at some point the tide turns where consumers, uh just like with Diet Coke, where consumers themselves find their way back to the brand, and you better at that point be good at capitalizing on that. You've got to capitalize on that. And there's a lot of conversations you know through the distribution networks now about how to do that at the local level with bottlers a lot more effectively when there's a trend, how do we jump on it at retail? And I think it could be a situation where you're kind of managing that something that you really don't have. A lot of control over because the consumers are going where they are. So you try to offset with other portfolio products, but make sure that you're reading the data correctly, understanding the trends when they turn, and can capitalize on those turning trends if they happen. That may be the best you can do. And that that's a good thing to do because at some point, you know, the market does what it does, consumers do what they do, how you react to it is really uh important, and how you anticipate and create contingencies for what to do uh later is like super important. So I think that's how these companies in these kind of categories are really going to be judged.

SPEAKER_00 44:36

I think you're 100% right.

Factbook Invite And Closing

SPEAKER_01 44:37

John, that was a lot of fun. Good talking to the industry with you. The factbook's a great proxy to kind of understand uh you know these broad trends in the industry, and I think you uh really delved into the the perfect notes there, and that was a lot of fun trading some thoughts with you on that. If you're uh interested in that factbook, go to beveragedigest.com and can uh order and download immediately there. And uh again, as John said, the data sheets are available in Excel form, so you can plug those into your models and uh play around with those numbers uh based on whatever industry you're in and what you need to understand in terms of the trend. So we invite you to take a look at that. But John, a pleasure as always, and uh look forward to doing this again soon.

SPEAKER_00 45:18

Wayne, great being with you. Thank you.