Wednesday, July 29, 2009

Soda's Moment in the Sun

It has been a long decade for CSDs. Consumer's increasing interest in "better for you" and "functional" beverages has been arrested by the economy, and CSDs are benefiting.

Results from Coke, Pepsi, DPS, CCE and PBG are all very similar. While CSD volume has declined, its pricing has increased while input costs are down. As a result there have been strong results from the major players and stock prices are up. As a large bottler put it to me recently - this is the best year this century for the bottler: the old price point paradigms for 2 Liters and 12 Packs have gone, replaced by far higher price points based on multi-purchase deals (two 2 liters for $3 etc).

In the past year the cost of gas is 60% of last year, aluminum is 50% of last year and corn (the principal sweetener) is 50% of last year. And all of the major players took out a significant number of heads from their budgets as they expected a similar cost environment in 2009 as they faced in 2008.

But it is unlikely that these results are little more than a short downhill stretch along an uphill road towards the challenges of tomorrow. Health and functionality trends are still there, just covered in the interim by the challenges of the economy.

The large CSD businesses still have to figure out the right portfolio for future success.

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