Coca-Cola and friends lose their fizz

Soft drink consumption is down 10 per cent since 2000

Late last year, Coca-Cola ran a series of ads in Australia as part of a campaign titled “Myths Busted.” In the ads, the company declared that Coke doesn’t make you fat, won’t rot your teeth and isn’t packed with caffeine. Those claims, no doubt, sent Aussie children into the streets on celebratory sugar highs. But the ads didn’t go over well with parents, or with the Australian government. The Australian Competition and Consumer Commission said the messages “were totally unacceptable” and “had the potential to mislead parents about the potential consequences of consuming Coca-Cola.” Coke, which is being forced to run corrections, plans to clarify its message in new ads.

As Coke’s rather desperate attempt illustrates, all is not well in the world of cola. Soft drink sales have been steadily on the decline in the last several years. Last year, carbonated soft drink sales fell three per cent in the U.S., according to Beverage Digest. That marked the fourth straight year of declines. The consumption of pop is down 10 percent since 2000, and hasn’t been this low since 1992, reports Beverage Digest. Sales in Canada have also been in decline for four of the past five years, says Gary Hemphill, managing director of the New York-based Beverage Marketing Corp.

While the decline has something to do with the bad economy, it is also a reflection of a broader shift towards healthier and more varied drinks, like juices and teas. Sales of bottled water are up, as are sales of energy drinks like Red Bull (which enjoyed a five per cent surge last year).

And while cola giants PepsiCo and Coca-Cola have diversified their beverage and snack holdings, soft drinks still represent the largest segment of the industry. That’s what makes the decline so worrisome and has soft drink makers scrambling to at least stabilize the category, says Hemphill. Pepsi is trying to reverse the slide with some rebranding and a new U.S. marketing campaign. So is Dr. Pepper. Coke has also launched a new global campaign. Hemphill says companies have also looked to add new flavours, as well as packaging to reduce the costs of drinks during the downturn.

But there are other troubles on the horizon. Coke recently suffered a major setback in its expansion efforts in China. Last week, the government there rejected Coke’s US$2.5 billion takeover of a local fruit juice brand—juices and teas are more popular than soft drinks in China—citing antitrust concerns.

Neither Coke nor Pepsi are in any real danger. Both, after all, are giant, multinational brands and investors are also still content. But the steady volume declines do suggest a subtle anti-cola sentiment. Analysts will be closely watching earnings reports from the companies due out next week. The fizzling volumes aren’t exactly a crisis, but pop’s glory days may well be behind it.