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Is the Recession Good for Soda Sales?

For the first time in five years, soft drink sales are rising.
June 16, 2010

ATLANTA - The recession has turned consumers away from pricier health drinks, while less expensive soft drinks have seen a resurgence, Time magazine reports. Carbonated sodas have seen a larger increase in sales than most other beverage segments, including sports drinks, juices and bottled water, according to Mintel International Group.

"Half of all buyers changed their nonalcoholic-beverage habits due to the recession," said Mintel analyst Garima Goel Lal. "Consumers shifted from more expensive beverages, such as energy drinks and ready-to-drink tea, to carbonated soft drinks."

Sales for soda rose 2.5 percent last year, the first yearly advance in five years. During the same 12-month period, milk and yogurt drink sales dropped close to 15 percent, while bottled water, fruit and vegetable juices, and sports drinks also declined. Energy drinks increased around 6 percent, but that was much lower than the more than 35 percent average yearly gain of the previous four years.

New flavors and flashy ad campaigns accounted for some of the pop in soda sales, but analysts point to the lower cost of carbonated beverages as the biggest contributor. "People stopped drinking the more expensive stuff and kept drinking soda ... because soda isn't that expensive," said analysts Damian Witkowski with Gabelli & Co.

Dr Pepper Snapple Group posted a more than 6 percent jump in sales of its carbonated drinks, led by Diet Dr Pepper and Diet Canada Dry brands gaining mid-teens percentage points during the year, according to Mintel. Coca-Cola��s Coke Zero, Cherry Coke Zero and Seagram��s, and PepsiCo��s Diet Wild Cherry Pepsi and Diet Mountain Dew also saw large increases.

"Carbonated soft drinks are still growing, but they��re growing from a much higher base," said David Garfield, a managing director and leader of the consumer-products practice at AlixPartners. According to the Nielsen Co., carbonated drink sales topped $18 billion for the 12 months ending in May.