The Soda Industry Is Undergoing 'Big Changes'

April 24, 2015

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The Soda Industry Is Undergoing 'Big Changes'

In a new report, Citi Research explained its key takeaways from the 2015 Beverage Forum Conference in Chicago.

According to the firm's analysts, The Coca-Cola Co (NYSE: KO) has positioned itself well for the short-term, but they believe the long-term industry-wide changes in the non-alcoholic beverage business could pose a challenge for the company.

Beverage Trends

Product innovation was a key topic of discussion at the conference. In the alcoholic beverage space, innovation in craft beer, flavored bourbon and flavored malt beverages has “materially depressed” sales of more traditional lagers and spirits.

Analysts believe that innovation will be a key to success in the non-alcoholic beverage space as well in upcoming years.

While Coca-Cola and Pepsico, Inc. (NYSE: PEP) have made strides to expand product offerings in recent years, analysts see increasing demand for “specialized” beverages.

Thirsty Millennials

The fastest-growing beverage demographic is millennials, and beverage companies are scrambling to keep up with the group's unique taste. Analysts explain that millennials prefer healthier beverages, customized flavors and packaging and a constant stream of new product offerings.

Coke Executive Speaks

Analysts attended a talk by Senior Vice President of Coca-Cola’s Sparkling Brands Katie Bayne. Bayne explained that the majority of Coca-Cola’s marketing efforts in 2015 will be focused on the core Coke brand.

Bayne added that Monster Beverage Corp (NASDAQ: MNST) and Keurig Green Mountain Inc (NASDAQ: GMCR) provide “different formats which offer a different pacing of caffeine,” allowing at-home consumers more freedom to customize their caffeine intake.

Acquisition Targets

Analysts see The WhiteWave Foods Company (NYSE: WWAV) as one potential acquisition target for a larger beverage name and note that they were impressed by Odwalla as well.

They also predict that Coca-Cola, Pepsi and Dr Pepper Snapple Group Inc (NYSE: DPS) will all likely be looking to make bolt-on acquisitions of start-up brands in upcoming years.