Soft drinks' fizz went flat even before NYC ban plan

Andrew Burton / Reuters

A 64-ounce drink is displayed alongside other soft drink cup sizes at a news conference at City Hall in New York, May 31, 2012.

By Martha C. White

Even if New York City?Mayor Michael Bloomberg's quest to limit the sale of soda and other sugary drinks has a positive impact on city residents' waistlines, it probably won't hurt the heavyweights of the soft drink market.

Their big challenge is a long-term trend that predates Bloomberg's anti-obesity platform by years: Americans just aren't drinking as much soda these days.?

Bloomberg's office, which has pushed other public health-related initiatives in the past, sent out a flurry of tweets Thursday touting the proposal with stats like, "Obesity kills thousands of NYers a year & adds $4 billion a year in health care costs."

If approved by the city's Board of Health, the campaign would ban sweetened drinks from being sold in containers larger than 16 ounces at delis, fast food outlets, concession stands and other establishments that fall into the category of food service providers. (Grocery and convenience stores would be exempt, as would unsweetened and diet beverages.)?

There's no getting around the fact that Americans consume a lot of soft drinks: We gulped down 43.5 gallons per capita last year, according to Beverage Marketing Corp. It's still the most popular category of beverage, but its popularity?is waning. "The secular trend in declining consumption has been going on for some time now," said Thomas Mullarkey, equity analyst at Morningstar. Consumers "have far more options available to them" besides soda.

"In general, we're not drinking more," said Gary Hemphill, senior vice president at Beverage Marketing. "The only way to gain volume is to steal share from other categories."

In its April earnings report, Coca-Cola Co. said North American sparkling beverage volume grew 1 percent for the quarter, compared with a 6 percent increase in the company the "still beverage," or non-carbonated category. It attributed the growth to brands like Dasani water, Gold Peak tea and vitaminwater.

There are more categories than ever fighting over the soft drink market. We drink nearly twice as much bottled water today as we did in 1999, according to Beverage Marketing Corp. Goldman Sachs analyst Judy Hong wrote in a January report that domestic soda sales in the fourth quarter of 2011 were outpaced by non-carbonated drinks. Bottled teas and energy drinks led the pack with roughly 7 percent and 13 percent sales increases for the quarter. (Soda sales fell half a percent.) ?

One reason analysts theorize consumers are eschewing soda is because of its perception as an unhealthy beverage. Although zero-calorie sodas exist and some juice-based and blended coffee drinks contain a lot of sugar from added sweeteners, soft drinks are saddled with a reputation as junk food.?

In a March report titled "Attitudes toward Beverage Sweeteners," market research firm Mintel found that a majority of consumers believe that sweetened beverages are a "main contributor" to the country's obesity epidemic.?

It doesn't help that most of the soft drinks produced domestically use high-fructose corn syrup, a sweetener around which controversy has sprung in recent years. The Food and Drug Administration this week rejected an application submitted by a corn industry trade group requesting permission to rename the product "corn sugar."?

"The current consumer preference toward all-natural food supports beverages without artificial additives such as high-fructose corn syrup (HFCS) and artificial diet sweeteners," the Mintel report said. A majority of people believe that sugar is healthier and tastes better than corn syrup, which is more commonly used in soft drinks.?

Hemphill said soft drink makers have an uphill battle ahead of no matter how Bloomberg's proposal pans out. "Our expection is that's a category that's likely to remain soft at least for some time," he said.

Top Talkers: New York City Mayor Michael Bloomberg is moving to ban super-sized soft drinks in the city. His plan is to restrict sales of sugary drinks to no more than 16 ounces a cup in most city locations. Mika Brzezinski supports the initiative, and she discusses it with the Morning Joe panel.

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