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Thursday, March 16, 2006

Trend: Carbonated Drinks Decline

Soft drink sales fall for first time in 20 years as health-conscious consumers increasingly opt for Water, Noncarbonated Products, and Energy.

According to Beverage Digest, volume slid 0.2% -- and if it hadn’t factored in energy drinks like Red Bull and Monster -- carbonated beverage volume would have tumbled even further, 0.7%.

The carbonated soft drink business in the U.S. has basic fundamental problems,” said John Sicher, editor of Beverage Digest. “This is the first generation of children that are going to grow up not viewing soft drinks as the ultimate treat. They’re growing up on things like sports drinks, water and noncarbonated drinks. As these little kids move into late teens and early adulthood, their drinking habits are going to be different than past generations.”

Trends so far this year appear to continue the downward slide, said Bill Pecoriello, beverage analyst for Morgan Stanley. He estimates the category will slip at rate of 1% over the next few years.

Even diet drinks have taken a hit, as sales have slammed on the brakes since the beginning of 2004, according to Information Resources Inc. data. Volume gains in diet carbonated soft drinks have steadily dropped to a 6% decline during the fourth quarter of 2005 from a volume gain of 8% during late 2004.

“Consumers say they don’t like the taste, are worried about artificial sweeteners and don’t view diet carbonated soft drinks as ‘healthy,’” Mr. Pecoriello wrote, citing Morgan Stanley research that showed 64% of water growth is coming from carbonated soft drinks.

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