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What Will Be the Next Coca Cola?


It may be years before Coke is ever toppled, but there are some brands making fast market gains despite an overall industry slump.



The USDA's Dietary Guidelines for Americans seem to be making a dent at last, if the latest Beverage Digest dispatch from the cola wars is any indication. For the sixth year in a row, total volume of sales for the carbonated soft drinks industry was down, although total moneys made – thanks to higher prices – were up from last year. Although there are more Americans with each passing year, they drink fewer sodas per capita. And when they do drink it, increasingly it's diet.

The Coca-Cola Co. (KO) is still holding onto 42 percent of the domestic market, far outpacing Pepsi's (PEP) 29.3 percent and Dr. Pepper Snapple's (DPS) 16.7. Nor are Coke's century-old rivals likely to make up the shortfall overseas, where Coke already has a stranglehold. It's No. 1 in China although that country makes many of its own soft drinks. (And the situation is even stranger, or sadder, in Africa. Read Soft Drinks -- A Weapon Against Malnutrition in Africa?, here.)

To knock Coke off its pedestal, a new soda would have to have Coke's aggressive reach. For now, only China and India have the population and only China the reach to present a viable competitor -- and they both love Coke.

While the brand seems fairly entrenched as the best-selling soft drink ever, world without end, amen -- its sales are nevertheless declining while much smaller sectors' are growing. Four of the top 10 soda brands by market share in 2010 were diet sodas, with regular Pepsi tumbling far enough to usher the plateaued Diet Coke forward as the second-most popular soda in the US.

The growth winners are Diet Mountain Dew and Diet Dr. Pepper and their high-fructose counterparts, as well as Sprite and Fanta. This change suggests not only that consumers are easing up on the HFCS in some areas, but that they're looking for flavor. Specifically, according to Beverage Digest, "citrus is gaining."

Also gaining the market share that Coke and Pepsi are losing is National Beverage Co. (FIZZ) which distributes Shasta and other off-brand sodas, and Hansen Natural (HANS), which makes its own sodas with cane sugar and natural flavors.

National Beverage uses what it calls "regional share dynamics" to target certain flavors to certain regions and demographics. For the moment, this means it sells very sweet sodas like Genuine Faygo Dee-licious Redpop in places where they call it "pop," and LaCroix sparkling water in places with redwoods.

Theoretically, though, it can expand this concept to include copying -- or buying -- not only various regional syrups but drinks with potential mass appeal; borderline-medicinal drinks like kombucha soft drinks, for example, or the Chinese herbal tea soda Wong Lo Kat.

Hansen is also poised to take increasing advantage of a gradual shift away from junk food, or at least toward one or two ingredients that seem to justify the rest of the drink: sugar rather than HFCS, natural citrus flavors, real fruit and herbs, and healthy additives like plant sterols or water-soluble vitamins. If Hansen's could, in short, find a way to mass-produce artisanal soda brands like Jones and Reed's, it could conceivably continue to gain market ground.

But oust Coke? No time soon.

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