NEIGHBORHOOD STORE ASSOCIATION

Summer 2006     

Vol. 8 No. 2

In  2005, the evolving U.S. refreshment beverage market enlarged by 3.2%, according to Beverage Marketing Corporation data. The top 10 brands in the market – which includes carbonated soft drinks, bottled water, ready-to-drink tea and coffee, fruit beverages, sports beverages and energy drinks – reveal the ever broadening array of American beverage tastes. Carbonated soft drink trademarks hold five of the top ten positions – joined by two bottled water trademarks, two fruit beverage trademarks and one sports drink.

Refreshment beverage category developments ranged from the astronomical growth of energy drinks to the relatively flat performance of fruit beverages and carbonated soft drinks.  Bottled water continued its strong growth, while the small energy drink segment outperformed all other categories.  However, the distinction between carbonated and not-carbonated beverages appears to be losing relevance for consumers, who now choose from a wide range of beverage types to meet a variety of need states.  

Big companies dominate the leading refreshment beverage trademarks; Pepsi-Cola (with five brands), Coca-Cola (with four) and Dr Pepper/Seven-Up  (with one) account for all of the top-ten trademarks. Aquafina, Gatorade and Tropicana (all from Pepsi) and Dasani (from Coke) were the fastest growing leading trademarks. The Coca-Cola trademark (including all brand variations) held the top spot among liquid refreshment beverages.  However, its volume, like the standard carbonated soft drink market as a whole, declined.  Coca-Cola Classic volume declined, and Diet Coke grew only slightly.  While some new product introductions, such as Coke Zero and Coke with Lime, contributed to the trademark’s overall volume, other recent brand extensions, like Vanilla Coke, C2 and Diet Coke with Lemon, experienced significant fall off soon after their introduction.  The phenomenon of short-lived volume boosts from new line extensions was also observed with other carbonated soft drink brands. 

Dr Pepper was the sole carbonated soft drink brand among the leading liquid refreshment beverages to grow in 2005.  Although brand add-ons like the regular and diet cherry vanilla versions contributed to overall Dr Pepper trademark volume, the core Dr Pepper brand also grew in 2005.

But the growth rate of Dr Pepper could not compare to the vitality of the leading non-carbonated liquid refreshment beverages, all of which are owned by the major soft drink companies. A sports beverage, two fruit beverages brands and two bottled waters ranked among the top ten in 2005. As with the carbonated soft drinks, their totals include all iterations. For example, Aquafina’s volume includes the still, sparkling and flavored varieties. Aquafina increased by more than 29% in 2005, making it strongest growing top-ten liquid refreshment brand in 2005.  (The still form accounts for the vast majority of the brand’s volume.)  Gatorade, which like Aquafina is a PepsiCo brand, also increased by more than 20% during the year, as did Coca-Cola’s Dasani bottled

“The categories are blurring and smaller segments are generally growing faster than the larger traditional ones,” said Michael C. Bellas, chairman and CEO, Beverage Marketing Corporation. Giving some indication of the blurring of beverage categories, the leading soft drink companies’ principal fruit beverages brands straddled the fruit beverage segment and the carbonated soft drink segment  (via small line extensions). Like carbonated soft drinks, fruit beverages as a segment contracted in 2005.  However, while Minute Maid volume dipped during the year, Tropicana (including the new Tropicana Twisters soda) grew considerably. Small segments such as RTD tea and coffee and especially energy drinks exhibited intensive expansion.  New brands such as Coca-Cola’s Vault and PepsiCo’s MDX, both of which seek to combine aspects of the carbonated soft drinks and energy drinks, contribute to the trend of category hybridization.

The second largest beverage category by volume – bottled water – enlarged at a double-digit pace in 2005.  The two bottled water brands among the top ten liquid refreshment beverages stood at the bottom of the list in 2005, but are poised to move up in the rankings. 

However, Gatorade, the sole sports beverages among the major liquid refreshment beverages, looks most likely to displace a carbonated soft drink to become a top-five trademark.  If recent trends persist, Gatorade could become larger than Coca-Cola’s Sprite as recently as this year.
Beverage Marketing Corp, April 19, 2006

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