Three of America’s largest soft drink makers — The Coca-Cola Company (KO), PepsiCo, Inc. (PEP) and Dr Pepper Snapple Group, Inc. (DPS) — pledged to reduce calories that Americans consume by 20% by 2025.
At the Clinton Global Initiative (CGI) 2014 CGI Annual Meeting in New York City, the companies agreed to promote bottled water, no-or-lower-calorie beverages and smaller portion sizes to achieve the shared goal. The soda giants are facing tremendous pressure over the role their carbonated sugary drinks have played in escalating the nation’s obesity rates.
The companies are also required to provide calorie counts and promote calorie awareness on vending machines, self-serve fountain dispensers and retail coolers in convenience stores, restaurants and other locations.
The move comes amid a difficult operating environment for the beverage industry. These companies have been seeing declining sales trends of their carbonated soft drinks (CSDs) for the past few years due to category headwinds. Growing health and wellness consciousness — consumers are particularly vigilant about the use of artificial sweeteners, high sugar content and related obesity concerns — have been affecting CSD sales of all major soft drink makers.
With increasing health consciousness among consumers, the companies are realizing that future profit and sales do not lie in a sugar-laden fizzy can. As a result, the beverage companies are shifting away from high-calorie carbonated beverages to produce healthier products like juices, energy and sports drinks.
Moreover, the companies are offering more choices to customers in package sizes, sweeteners and beverages (including more low- and no-calorie selections). The companies are also making drinks with evolutionary natural sweeteners and flavorings aimed at reducing calories. Coca-Cola has launched Coca-Cola Life, a naturally sweetened mid-calorie cola in Chile and Argentina and plans to expand it to other markets through the rest of the year. Pepsi also expects to launch lower calorie, naturally sweetened non-cola products in the U.S. this year.
All the three beverage giants carry a Zacks Rank #2 (Buy) as they outperformed expectations in the first half of this year. Another beverage maker, Monster Beverage Corporation (MNST), also carries the same rank.
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