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Soda Sales Plunge

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NEW YORK The carbonated soft drink category posted a volume decline for the first time in two decades, according to Beverage Digest.

All-channel volume fell 0.2 percent in 2005. Not including the exploding energy drinks category in the equation, the category fell 0.7 percent.

"The rules for success in the soft drink industry are changing rapidly," said William Pecoriello, beverage analyst for Morgan Stanley & Co., in a note. "Consumer choices are exploding. Consumers have greater knowledge about products, are taking personal responsibility for their health/wellness and growing more sophisticated."

He estimated the category would "continue to decline at around a 1 percent clip over the next few years."

Soda per capita consumption shrank from 837 servings to 828 last year as consumers continue to migrate to other beverage choices like bottled water and sports drinks.

Coca-Cola and PepsiCo have intensified their efforts to offer new beverage choices to consumers (Brandweek, March 6). Coke is launching Gold Peak teas and a Godiva dairy-based coffee drink, while Pepsi is expanding its Starbucks line of ready-to-drink beverages and developing Ben & Jerry's licensed dairy drinks.

"They need to step up their investment in R&D, find ways to provide focus/attention to incubate new products, increase their speed/flexibility and find new routes to market," wrote Pecoriello.

PepsiCo saw the biggest loss with its carbonated soft drink volume down 1.2 percent. Coke was relatively flat while Cadbury grew 0.6 percent.

Overall, PepsiCo's total portfolio driven by Gatorade and Aquafina grew 4.2 percent while Coke was up half as much (2 percent).