“Nothing is more indicative of this than the fact that traditional brands like PepsiCo and Coca-Cola are even launching their own prebiotic sodas this spring,” Madoff continued. “Brands are recognizing that social media and influencers are driving demand for functional benefits, making it a space they can’t afford to ignore.”

Earlier this year, PepsiCo took a major step into the prebiotic CSD market when it announced it was acquiring the Austin, Texas-based poppi for $1.95 billion, including $300 million of anticipated cash tax benefits for a net purchase price of $1.65 billion. The acquisition was finalized later this spring.

“We’ve been evolving our food and beverage portfolio over many years, including by innovating with our brands in new spaces and through disciplined, strategic acquisitions that enable us to offer more positive choices to our consumers,” said Ramon Laguarta, chairman and CEO at PepsiCo, in a statement. “More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness. poppi is a great compliment to our portfolio transformation efforts to meet these needs.”

Paige Leyden, director of Americas food and drink at Mintel, Chicago, shared that the U.S. CSD market has grown over the last year, but at a slower pace compared to prior years.

“The market size is estimated at $55.2 billion in 2024, up 5.1% since 2023, compared to a 9.1% increase from 2022-2023,” she said in Beverage Industry’s April 2025 issue. “The market’s steady growth is driven by strong consumer demand, innovative flavors and the enduring appeal of established brands.”

Sales data from Chicago-based Circana echoes similar sentiments about the category’s steady dollar sales growth. For the 52 weeks ending April 20 in total U.S. multi-outlets, the carbonated beverages category recorded dollar sales of $46.1 billion, a 6.2% increase. In terms of volume, unit sales were up 0.9% for the same time period.

Gary Hemphill, managing director of research at Wintersville, Ohio-based Beverage Marketing Corporation (BMC), meanwhile stated that overall volume has remained slow, with a slight improvement over 2023 due to a slowdown in inflation.

In terms of functional trends affecting the CSD market, Hemphill noted that healthier products with functional benefits were capturing consumer interest.

“The idea to make CSDs healthier by adding functional benefits is relatively new to the category, but seems promising based on the success of some of the prebiotic products,” he explained in Beverage Industry’s April 2025 issue.

Despite slow growth, Keychain’s Madoff noted that functional trends have changed the game for CSDs.

“Consumers aren’t just looking for a good-tasting drink, they want added benefits like prebiotics, antioxidants or adaptogens,” he said in Beverage Industry’s April 2025 issue. “This demand has fueled the rise of functional sodas, which blend gut health benefits with classic soda flavors. While this trend is still in its early stages, it’s clear that the market is shifting in this direction, and there’s a ton of room for growth.”

Mintel’s Leyden noted in Beverage Industry’s April 2025 issue that CSDs with added functional benefits are capturing consumer interest — having a notable impact on the market.

“About 32% of consumers express interest in functional CSD innovations, and 58% are willing to pay more for healthier alternatives,” she shared. “These consumer preferences enable both established brands (e.g. Simply Pop from Coca-Cola) and emerging brands to explore ‘better-for-you’ recipes and incorporate functional ingredients like prebiotics and probiotics, which are associated with digestive health.”

Growing in popularity

Aside from leaning into functional trends, experts shared in Beverage Industry’s April 2025 issue that CSD makers are pursuing flavor innovations to garner consumer interest.

“These efforts are crucial for maintaining consumer interest and driving growth in the CSD market,” Mintel’s Leyden said. “Some key innovations we’re seeing currently include novel and exotic flavors (e.g. elderflower and lychee), cultural and regional inspirations (e.g. Coca-Cola K-Wave), nostalgic flavors, and limited-time and seasonal offerings.”

BMC’s Hemphill noted that brands have recently become more adventurous in flavor innovation.

“Not only has this at times boosted growth, but new flavors can bring news and excitement to the category,” he shared.

Meanwhile, Keychain’s Madoff highlighted how CSD brands are showing up with creativity to capture consumer interest.

“We’re seeing new and emerging brands do a great job at reinventing classic soda flavors like root beer and cola with a healthier twist, while traditional brands are taking more risks and experimenting with different flavors,” he said in Beverage Industry’s April 2025 issue. “Mimicking traditional flavors is a great strategy when it comes to ‘better-for-you’ CSDs because it provides consumers with something familiar that they know and love, which makes it more appealing to consumers who may have otherwise been skeptical.

“At the same time, limited-edition releases and seasonal flavors are being used to test what resonates with consumers without a long-term commitment,” Madoff continued. “This is a great strategy because it’s something that gets consumers excited in terms of exclusivity or wanting to try the latest and greatest offering from a favorite band.”

With regard to regaining market share, Madoff noted that it is all about adapting to what consumers want: healthier options, natural ingredients and functional benefits.

“Newer brands in this space have proven that there’s an appetite for prebiotic sodas that offer digestive benefits without compromising on taste,” he said in Beverage Industry’s April 2025 issue. “There’s also a real opportunity in the convenience space and offering ready-to-drink (RTD) formats that fit into busy lifestyles.

“Winning back consumers comes down to agility and the ability to capitalizing on trends, meaning, brands that can quickly adapt to trends like gut health and immunity while clearly communicating their value proposition are in the best position to regain market share,” Madoff continued. “Social media has become a powerful indicator of demand, and brands that pay close attention to emerging product conversations and react quickly have a competitive edge.”

At the same time, BMC’s Hemphill suggested that CSD companies should focus on areas of growth like diets, functional ingredients and unique flavor innovation.

“It’s more challenging than ever for the category to grow because of all the competition from other products and categories that are often better positioned for what today’s consumers want,” he said.

Mintel’s Leyden noted, in Beverage Industry’s April 2025 issue, that the CSD market has had opportunities to not only regain market share, but also potentially expand by addressing consumer preferences and leveraging emerging trends.

“By focusing on sustainability initiatives, expanding consumption occasions, targeting younger consumers and leveraging brand loyalty, the CSD market can work toward regaining its market share and meeting the evolving needs of consumers,” she said.

Looking ahead

As the CSD market shifts gears, experts shared what the future holds for the category.

Keychain’s Madoff, in Beverage Industry’s April 2025 issue, predicted that the market would see a combination of nostalgia and innovation.

“We’re going to see legacy brands reimagining their classics with cleaner ingredients, alongside new brands that are pushing the boundaries with functional benefits and bold flavors,” he stated. “We’ll also continue to see more and more brands launch prebiotic products to keep up with demand, like Coke with Simply Pop and Pepsi with Soulboost.”

Mintel’s Leyden, meanwhile, anticipated that brands would continue to meet consumers’ evolving need states.

“The future of CSDs can be characterized by a focus on innovation, health, personalization and sustainability as brands strive to meet the changing preferences and expectations of consumers,” she noted.

BMC’s Hemphill explained, in Beverage Industry’s April 2025 issue, that he expects the future for CSDs to be demanding.

“CSDs have declined 18 out of the last 20 years; growth in the years ahead will be challenging, but not impossible,” he said.

Keychain’s Madoff noted that it is crucial for brands to look beyond current trends and anticipate what the “next big thing” will be.

AI and data collection will play an increasingly important role in helping brands understand consumer preferences, Madoff explained, while also assisting brands in bringing more personalized products to the market.

“We’re excited to see how this category evolves, especially as consumers continue to demand more from what they drink — both in terms of health benefits and transparency,” he stated in Beverage Industry’s April 2025 issue.