The US carbonated soft drink market’s long battle to achieve growth persists and marketers are consequently placing greater emphasis on increasing the channels of distribution, according to the Beverage Marketing Corporation – a leading market research and consulting firm.

After six straight years of sub-1% growth, volume declined for the third straight year in 2007. Prior to 2005, the market had not declined in at least 20 years. US carbonated soft drink volume has not increased at an annual rate greater than 1.0% since 1998, and over the course of the nine-year period since then, it has actually decreased at a compounded annual rate of 0.1%.

For decades average intake of carbonated soft drinks consistently edged upward, with consumption doubling from the early 1970s to the late 1980s. In 1998, volume per person neared 55 gallons (208 litres). By 2007, however, that figure had fallen to less than 49 gallons (185 litres). Despite this dip in average intake levels, US consumers still drink roughly two-thirds more soft drinks than bottled water, the number-two beverage by volume.

Although virtually every type of CSD (carbonated soft drink) – including both regular and diet as well as cola and the other major flavors – contracted in 2008, volume did not decline in all distribution channels. Mass merchandisers have been a fast growing distribution channel for carbonated soft drinks recently and their share exceeded 10% last year – after commanding less than 8% in 2002.

Unlike supermarkets, mass retailers continued to position CSDs as loss leaders, according to the Beverage Marketing Corporation.

A loss leader is a product sold at or below cost to draw people into a store, with frequently purchased goods often used to ensure consumers will be aware that the price for the product is cheap. A mass merchandiser, such as Target, could justify the CSD loss leader positioning by selling high margin clothing, cosmetics and home products that are often purchased on impulse.

Supermarkets remain the single largest retail channel for carbonated soft drinks, but marketers have placed great emphasis on making their products available through every major retail channel – from convenience stores to drug stores and mass merchandisers.

Demand for other beverage options, such as bottled water and energy drinks, has contributed to the sales fall amongst CSDs, and this has led to the leaders in the category – Coca-Cola and PepsiCo – consistently diversifying their offering to ensure they are not left behind by the shift in consumer preferences.

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