Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Pepsi’s India investment can’t revive fizz for Big Soda

Changing consumer choices spell a troubled future for sodas

The sugared water business is an idea whose time is long gone. PepsiCo chief executive Indra Nooyi’s brave announcement about Pepsi planning to invest Rs33,000 crore in India over the next six years might help to perk up the company’s flagging market share. The investment commitment comes just three months after Coca-Cola announced it was on track to spend $5 billion in India over the next eight years. Mighty though the investments seem, they will do little to arrest the downward slide the once mighty soft drink business finds itself in.

The fact is Pepsi and Coca-Cola and the myriad such drinks have been rendered irrelevant by the changes in the marketplace. Consumer preferences for non-sugared beverages combined with the uneasy findings of various health reports have sounded the death knell for sodas, once an integral part of American (and, therefore, global) pop culture.

Sales of carbonated soft drinks are on an irreversible downward slide in the US, with fizzy drinks now making up about 40% of the US beverage market, compared with 60% a decade ago. Even volume sales of diet sodas have been falling sharply. Clearly aspartame and other artificial sugar substitutes are not the answer. Both the beverage giants Coca-Cola and PepsiCo have suffered, with US sales for both companies hardly growing. To offset declining sales in their home markets they are ramping investments in emerging markets like India and Brazil.

What’s worse for the cola companies, they are also losing their aura. In Interbrand’s annual report of Best Global Brands, Coca-Cola, fell to No. 3 this year, losing its top spot for the first time ever while Pepsi is ranked No. 22. The opening line in the 2013 Interbrand report is revealing: “Every so often, a company changes our lives, not just with its products, but with its ethos. This is why, following Coca-Cola’s 13-year run at the top of Best Global Brands, Interbrand has a new No. 1—Apple."

Coca-Cola and Pepsi no longer affect lives. That role is now increasingly reserved for tech companies which take up five of the top 10 spots for 2013. The five include such iconic names as Apple, Google, Microsoft, Samsung, and Intel.

No one is crooning “those days of soda and pretzels and beer" any more. It is rare to find among the younger population any devout advocate of either Pepsi or Coke with studies now showing that kids today are drinking less soda. And that’s not all. They’re drinking fewer sugary drinks overall—a category that includes sports drinks like Gatorade and Powerade, flavoured waters like Vitaminwater, and fruit drinks.

That’s a body blow to a business whose growth was fuelled by its appeal to the youth. Indeed, Pepsi’s surge in the 1960s came after it repositioned itself as “the drink of youth". Today that youth segment, much more health and calorie conscious, has turned away from colas. With most schools banning soft drink sales, and efforts on to influence even adult consumption, sodas are everyone’s favourite whipping boys. Mexican President Enrique Peña Nieto has proposed taxing heavily sweetened soft drinks while New York Mayor Michael Bloomberg attempted, unsuccessfully, to impose a “Sin Tax" on Big Soda.

In recent years both companies have launched a slew of healthier drinks—including juices, and even water. But the problem is the whole branding and marketing correlative of these is unlike anything in the hoary history of the cola business. Despite popular culture figures like Beyonce or Marc Anthony, the slur of being bad for the body refuses to leave the drink. Various studies have claimed that consumption of sugar-sweetened beverages increases type 2 diabetes. And not only is the business bad for its consumers, it is being accused of exploiting others as well. Recently Oxfam named Coca-Cola and PepsiCo among the companies responsible for serious land grabs in its quest for producing sugar for its drinks. Under pressure Coca-Cola announced a “zero tolerance for land grabs" policy aimed at protecting communities from losing their land to big landowners.

Co-joined in their travails, the two former adversaries almost seem to be co-conspirators now rather than the feisty foes of yore as they try to roll back the rising tide of consumer disapproval for their perceived eco-unfriendliness. Both have attempted to move to selling healthier foods and beverages. But in doing so they may have ended up losing their coolth and with it the connect to a generation that considers Facebook fuddy duddy and has found new icons to worship even in the happiness space.

Is the age of the cola over? Tell us at views@livemint.com

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