Filed under: Coca-Cola (KO), PepsiCo (PEP), Marketing and advertising
The cola wars between Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP) that consisted of a high-profile battle for carbonated supremacy are quiet for now and, according to some experts, it’s hurting the industry.
Some industry experts predict that soda sales will decline 1% per year for the next ten years. The accuracy of such a forward-looking prediction aside, it puts a lot of pressure on the soda companies.
Coke responded with its high-profile acquisition of Glaceau, the maker of VitaminWater, and Pepsi is preparing the launch of Tava, “An Inspired Sparkling Beverage” promising “Zero Calories. Zero Caffeine. Zero Worries.” The packaging looks slick and the flavors — Tahitian Tamure, Mediterranean Fiesta, and Brazilian Samba — certainly sound enticing. The product will launch in the first half of 2008, but Pepsi investors should be wary of putting too much faith in it. A large percentage of new beverages fail to catch on with consumers — Remember Crystal Pepsi, Pepsi Blue, and New Coke?
Maybe they’ll be able to compensate for the decline in categories like energy drinks and vitamin-enhanced water — but investing in Coca-Cola when you think Coke is headed for a long decline seems silly — especially given that the stock hit a multi-year high on Friday.
With the decline — and expected continuation of the decline — in soft drink sales, you also have to wonder about Jones Soda’s (NASDAQ: JSDA) prospects. The company has its own serious internal problems, and trying to make a comeback in a declining industry could prove too much for it to handle.
Perhaps big new marketing campaigns and a rebirth of the cola wars can help brighten soda’s prospects — but if the decline is caused by factors like increasing health-consciousness and a preference for noncarbonated drinks, it might just be a big waste of money.
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