Consumers' increasing dislike for sodas along with their increasing preferences for healthy still beverages and snacks all represented themes in last week's news surrounding beverage giant Coca-Cola (NYSE:KO), snack/beverage conglomerate PepsiCo (NASDAQ:PEP), and their little brother Dr Pepper Snapple Group (NYSE:KDP). Coca-Cola reported further weaknesses in its carbonated soda segment with sparkling volume declining 1% in its most recent quarterly report. Carbonated sodas serve as an increasing drag on Coca-Cola's overall volume reports Beverage Daily. According to the newsletter, Coca-Cola's global volume growth has shown a steady decline annually with volume growing 6% in 2010, 5% in 2011, 4% in 2012, and a mere 2% in 2013. PepsiCo also saw a 1% decrease in its North American carbonated soda business. In Latin America PepsiCo saw its overall beverage volume decline due to carbonated related soda taxes in Mexico in the most recent quarter.
Simply Orange proves popular
In contrast to Coca-Cola's carbonated sodas, it's still beverage volume increased 8% in the most recent quarter. Coca-Cola's still volume got a boost from brands such as Simply Orange which saw a double digit expansion in North America. Simply Orange goes against the overall decline in orange juice volume stemming from concerns of health care professionals and consumers regarding the sugar and calorie contents of orange juice in general, according to Beverage Daily. The all natural perception of Simply Orange serves as a draw for consumers. However, doubts exist as to the legitimacy of Simply Orange's "pure" and "natural" status. Until claims prove otherwise, consumers will likely continue snapping up the product.
Dr Pepper minus Ten
Beverage Daily cites a study performed by a Wall Street firm indicating that Dr Pepper Snapple Group's Ten diet line of sodas are losing placement in convenience stores. According to the survey, the product line only resides in 72% of convenience stores surveyed versus 82% about a year ago. Convenience stores complain about Ten's lack of repeat business. Overall diet soda volume suffered relatively worse in 2013 according to Beverage-Digest. Consumer health concerns about diet soda ingredients such as aspartame serve as a driver for this accelerated decline.
Maybe PepsiCo should change its name to Frito-Lay Co. Here's why. Snacks carried PepsiCo in its most recent quarter. Its reported global snack volume increased 2% versus flat volume for beverages. PepsiCo's CEO Indra Nooyi believes its business will lean more toward snacks in the future, according to the newsletter Bakery and Snacks. PepsiCo's snacks also retained top positions in a number of its markets. Frito-Lay North America and Quaker Foods North America both reported strong gains in volume when factoring out currency fluctuations, mergers, and divestitures. Frito-Lay's biggest brands -- Ruffles, Cheetos, Doritos, Tostitos, and Lay's -- all served as catalysts for revenue growth according to Bakery and Snacks.
What should investors do?
Coca-Cola shareholders shouldn't run for the hills just yet. Coca-Cola still possesses the largest non-alcoholic beverage infrastructure on the planet. The future for this company will likely come from still beverages. PepsiCo shareholders should enjoy a bright future brought on by its strong snack portfolio. Potential investors in Dr Pepper Snapple Group should probably take their investment dollars elsewhere while product innovations such as the Ten diet line and even some of its healthy beverages fail to perform. Dr Pepper Snapple Group's lack the scale and dependence on the distribution networks of Coca-Cola and PepsiCo also give them the upper hand.