For the First Time in two Decades, the Number of Soda Cases Sold in the United States Declined. in 2005, Case Volume was Down 0.7 Percent to 10.2 Billion Cases.

Category volume dropped 3.9 percent in combined channels, with Coca-Cola falling 4.2 percent, Pepsi-Cola sinking 4.7 percent and Cadbury Schweppes dipping 1.2 percent. Even flagship diet brands took a hit, with Diet Coke’s volume tumbling 5 percent in the combined retail channels and Diet Pepsi’s volume declining nearly the same at 4.7 percent.

Globally, both the Coca-Cola brand and Sprite recorded their highest growth rates in five years, Coca-Cola’s annual report says. For the first quarter of 2006, Coca-Cola was on track to deliver its long-term growth targets, says Neville Isdell, chairman and chief executive officer. “Spurred by innovation and execution in key markets and increasing success in stabilizing some challenging ones, we effectively balanced results across our global operations to deliver 5 percent volume growth – 3 percent in carbonated and 11 percent in noncarbonated beverages – ahead of our long-term target,” he says. “Strong growth in our Latin America group and our other emerging markets, along with another solid quarter in North America, is helping to drive our business.”

Global carbonate volume (MILLIONS OF LITERS)
SUBSECTOR	2005	FORECAST 2006
COLA CARBONATES	108,733.4	110,697.4
NON-COLA CARBONATES	79,257.5	80,747.7
TOTAL	187,990.9	191,445.1
Source: Euromonitor International, 2006

Key brands drove the 3 percent unit case volume increase, with Coca-Cola, Sprite and Fanta growing unit case volume 3, 5 and 2 percent, respectively, in the quarter. Unit case volume growth in North America in the first quarter for carbonated beverages was positive. Unit case volume of diets and lights increased 2 percent in the quarter as continued success of Coca-Cola Zero and Diet Coke Sweetened with Splenda led to segment share gains, the company reports. Innovation continued in the quarter, contributing to unit case volume growth with the introduction of Coca-Cola Black Cherry Vanilla, Tab Energy and Vault and the expansion of Full Throttle.

An introduction of a different sort, the company relaunched Sprite in May with a new advertising campaign focusing on the brand’s “Lymon” taste and the first packaging update since the early ‘90s. The new package design features the familiar silver, green and blue color and the Sprite brand name with bubbles. The updated imagery is enhanced by the inclusion of a new “S” brand icon.

In 2005, volume at PepsiCo Beverages North America grew 10 percent because of increases in Gatorade, Aquafina and Propel fitness water. Sales of diet carbonated soft drinks rose slightly, offsetting a slight decline in sales of regular soft drinks.

For the first quarter of 2006, volume grew 5 percent for PepsiCo Beverages North America, with the division’s noncarbonated beverage portfolio increasing 18 percent and carbonated soft drinks declining 1 percent. The decline in CSD volume reflects a low-single-digit decline in Pepsi offset somewhat by a low-single-digit increase in Mountain Dew and a slight increase in Sierra Mist, the company says. Across the brands, both regular and diet CSDs experienced low single-digit declines.

Soft drink volume by company
Brand	% change vs. prior year	Market Share	% change vs.prior year
COCA-COLA	-4.2	35.7	-0.1
PEPSI-COLA	-4.7	34.7	-0.3
CADBURY SCHWEPPES	-1.2	17.6	0.5
CATEGORY TOTAL	-3.9	100.0	0.0
* ALL CHANNELS, Excluding Wal-Mart Source: Information Resources Inc./ACNielsen; full-year 2005

Pepsi-Cola’s Mountain Dew line now includes a revamped Diet Mountain Dew with a new taste featuring a blend of sweeteners including aspartame, sucralose and ace-k. The first change to Diet Dew’s formula in 15 years, PepsiCo distributed more than 3 million cans of the new diet in one day, making it the largest single-day sampling effort in the company’s history.

During a year in which Cadbury Schweppes sold its European beverage business for $2.2 billion, the confectionery/beverage company still made carbonated soft drinks a priority in 2005. Beverage sales rose 6.2 percent, and Cadbury Schweppes said it increased its market share in the United States to 17 percent, largely due to the introduction of Cherry Vanilla Dr Pepper.

Top soft drink brands by volume
SHARE % CHANGE	% CHANGE VS. MARKET COMPANY PRIOR YEAR		MARKET SHARE
COCA-COLA CLASSIC	-6.2	13.6	-0.3
PEPSI-COLA	-6.7	12.2	-0.4
DIET COKE	-5.0	7.5	-0.1
MOUNTAIN DEW	-2.0	6.5	0.1
DIET PEPSI	-4.7	5.7	0.0
PRIVATE LABEL FLAVORS	-4.5	5.3	0.0
SPRITE	-3.7	5.1	0.0
DR PEPPER	-3.7	4.6	0.0
CAFFEINE-FREE DIET COKE	-8.4	2.4	-0.1
PRIVATE LABEL COLAS	-6.9	2.4	-0.1
* ALL CHANNELS, Excluding Wal-Mart Source: Information Resources Inc./ACNielsen; full-year 2005

In April, Cadbury Schweppes Americas Beverages agreed to buy a 53 percent stake in Dr Pepper/ Seven Up Bottling Group from The Carlyle Group for $334 million. Following completion, the company intends to purchase the remaining equity in Dr Pepper/Seven Up Bottling Group in respect to shares held by management and employee share options, for an additional $19 million. The purchases will increase the company’s share of the bottling group from 45 percent to 100 percent.

In CSDs, strong growth is being driven by good performances from Dr Pepper and by other flavor brands such as Sunkist and A&W, the company reports so far for 2006. The No. 3 soft drink group in the United States behind Coca-Cola and PepsiCo Inc., Cadbury Schweppes benefited from flavored line extensions and advanced its lines with reformulations. Cherry Vanilla Dr Pepper and its diet version, which launched in 2004 in select markets and rolled out nationwide in 2005, received a marketing push from Cadbury Schweppes in 2005. The company also added to its classic soda line with the launch of Berries & Cream Dr Pepper and Diet Berries & Cream Dr Pepper in April. Additionally launching in April, 7 UP underwent a reformulation with an improved lemon lime flavor and all natural ingredients, and now will be rebranded 7 UP, “now 100 percent natural.”

All the ingredients in 7 UP now come from natural sources, and artificial ingredients, such as the artificial flavor preservative, calcium disodium EDTA, have been removed. The food industry watchdog group the Center for Science in the Public Interest has threatened to sue Cadbury Schweppes over the all-natural campaign. At issue is the use of high fructose corn syrup, which the group claims is not a natural ingredient. The company responded by saying it was “entirely confident in the accuracy” of the claim, and that high fructose corn syrup is a natural ingredient made from corn and is processed using similar methods to other natural foods and ingredients. BI