The Diet Coke Bubble Also Pops
With everyone focusing on the stock market and debating whether the second tech bubble has finally popped as it tends to do every so many years, another bubble also appears to have burst, and this time it is literally a bubble - that in carbonated diet coke. The WSJ reported that "for 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity."
The trends are industrywide, but it is especially bad news for Coca-Cola Co. a company that derives almost 75% of its global sales volume from carbonated soft drinks. "Sugar water with bubbles is not the future of the world. There's an existential issue,'' said Tom Pirko, an industry consultant at Bevmark LLC.
Maybe. But don't tell that to the Atlanta-based company which instead of diversifying is doubling down by "boosting advertising, introducing new products, and using singer Taylor Swift as a pitchwoman."
The chart below summarizes the problem: while sales of Coke's flagship product, Coca-Cola, are down almost 10% since 2007, the real pain is in the Diet product whose sales have tumbled at double that rate.
The main reason for Diet Coke's woes: aspartame.
Coke is defending aspartame, the main artificial sweetener in diet soda, citing more than 200 studies affirming its safety. At the same time, it plans to roll out Coca-Cola Life, a moderate-calorie version sweetened with stevia plant extract, across more countries, after releasing the drink in Argentina and Chile last year.
For now, judging by actual sales numbers, the consumers aren't buying it.
The pace of Coke's global soda volume growth slowed to 1% last year from 3% in 2012 as concerns about health and obesity spread. Last month the World Health Organization suggested that individuals limit consumption of added sugars in food and drinks to 6 teaspoons a day—less than the 9 teaspoons in a 12-ounce can of Coke.
The new drag on Coke's U.S. business is diet soda. Diet Coke volume has been down for eight straight years, accelerating the decline in the past three. Diet Coke sales plunged 6.8%, in volume terms last year, according to Beverage Digest. Diet Pepsi sales fell 6.9%, but PepsiCo, with its enormous snacks and foods business, is far less dependent on soda than Coke is.
Soda volume in Mexico, Coke's second-largest market, have fallen an estimated 5% or more since the country introduced a tax on sugary beverages in January.
The worst news for the food and beverage industry: if Americans (and Mexicans) are starting to care about the content of what they put in their mouth, the repercussions could be dire not only for soda companies, but certainly for makers of fast food - because it only takes a quick google search to find out just what is actually contained in that tasty-looking fried "burger."
On the other hand, with most untainted food products getting increasingly more expensive, it is doubtful if even the health considerations of the majority would trump their inability to purchase anything more nutritious than readily available fast food, which incidentally is also the reason for America's creeping healthcare catastrophe.
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