The Decline of ‘Big Soda’
The drop in soda consumption represents the single
largest change in the American diet in the last decade.
largest change in the American diet in the last decade.
OCT. 2, 2015
Five
years ago, Mayor Michael A. Nutter proposed a tax on soda in Philadelphia, and
the industry rose up to beat it back.
Soda
lobbyists made campaign contributions to local
politicians and staged rallies, with help from allies like the Teamsters union
and local bottling companies. To burnish its image, the industry donated $10 million to
the Children’s Hospital of Philadelphia.
It
worked: The soda tax proposal never got out of a City Council committee.
It’s a
familiar story. Soda taxes have also flopped in New York State and San Francisco. So far, only superliberal
Berkeley, Calif., has succeeded in adopting such
a measure over industry objections.
The
obvious lesson from Philadelphia is that the soda industry is winning the
policy battles over the future of its product. But the bigger picture is that
soda companies are losing the war.
Even as
anti-obesity campaigners like Mr. Nutter have failed to pass taxes, they have
accomplished something larger. In the course of the fight, they have reminded
people that soda is not a very healthy product. They have echoed similar
messages coming from public health researchers and others — and fundamentally
changed the way Americans think about soda.
Over
the last 20 years, sales of full-calorie soda in the United States have
plummeted by more than 25 percent. Soda consumption, which rocketed from the
1960s through 1990s, is now experiencing a serious and sustained decline.
Sales
are stagnating as a growing number of Americans say they are actively trying
to avoid the drinks that have been a mainstay of American
culture. Sales of bottled water have
shot up, and bottled water is now on track to overtake soda as the largest
beverage category in two years, according to at least one industry projection.
The
drop in soda consumption represents the single largest change in the American
diet in the last decade and is responsible for a substantial reduction in the
number of daily calories consumed by the average American child. From 2004 to
2012, children consumed 79 fewer sugar-sweetened beverage calories a day,
according to a large government survey,
representing a 4 percent cut in calories over all. As total calorie intake has
declined, obesity rates among school-age children appear to have leveled off.
The
change is happening faster in Philadelphia than in the country as a whole.
Daily soda consumption among teenagers, a group closely tracked by federal
researchers, dropped sharply — by 24 percent — from
2007 to 2013, compared with about 20 percent for the country. Last month, the
city Department of Public Health reported a sustained decline in childhood obesity over
the last seven years.
Those
reductions are not accidents. The soda tax didn’t pass. But the debate about
it, along with a series of related city policies, helped discourage people from
drinking soda.
At the Washington State Fair in Puyallup, Wash., last month, two
diners enjoyed caloric fair food, but accompanied it with water, not soda. CreditRuth
Fremson/The New York Times
The
Philadelphia school district forbids the sale of sugary beverages in schools
and limits their availability in public vending machines. The city provides
financial incentives for corner stores to highlight healthy foods. And it sends
educators into public school classrooms to teach children about nutrition.
Philadelphia,
which also has one of the country’s strictest menu-labeling
laws, for two years ran radio and television ads encouraging
parents to think twice about serving sugary drinks to their children.
“It’s a
fight every day, and you just have to stick with it,” said Mayor Nutter, who
will leave office in January. “You can’t give up, because it’s just really
important.”
But
while Philadelphia’s enthusiastic attention has led to outsize results, soda
consumption is declining even in cities and towns that have not made big local
investments in obesity prevention and public health. The public health
community has coalesced around an anti-soda message, and health officials and
industry experts agree that public attitudes about soda and consumer tastes are
shifting in ways that may be permanent.
The beverage
industry continues to fight these shifts — and especially to fight taxes on its
products. But it is also aware that after decades of selling a handful of
popular, iconic products, changing public attitudes are leading to a profound
change in the nature of the business.
The New
Tobacco
This
summer, executives from the beverage industry gathered at the Harvard Club in
New York City. The annual event, hosted by the trade magazine Beverage Digest,
featured speakers from the three largest soda makers — Coca-Cola, PepsiCo and
the Dr Pepper Snapple Group — along with smaller upstarts, like SodaStream, the
home seltzer maker company, and Talking Rain, which makes no-calorie carbonated
fruit drinks called Sparkling Ice.
Along
the wood-paneled walls, croissants, fruit and silver urns of coffee were laid
out. But the hot drinks were largely ignored. The industry’s rapidly expanding
bounty was displayed in the center of the room. In an array of ice buckets were
Snapple Sorta Sweet, Squirt, Tropicana Farmstand juices, Lipton Sparkling Iced
Tea. In a back corner, attendees could make their own lime-basil and coriander
apple blossom sodas with a SodaStream machine.
Such
events give companies a chance to show their stuff and brag about their
successes, but there was nothing bubbly about the atmosphere. This is an
industry grasping to master the shifting market.
As John
Sicher, Beverage Digest’s publisher, put it in his blunt opening remarks: “It’s
been a really challenging decade. It would have been a lot rougher if not for
bottled water.”
At the Washington State Fair in Puyallup, Wash., last month,
lining up for water.CreditRuth Fremson/The New York Times
As
sales of the companies’ mainstay products have declined in the United States,
the companies have scrambled to offer new products better suited to consumer
tastes. Iced teas, sports drinks and flavored waters are smaller but
fast-growing segments of the beverage industry. Coca-Cola, for example, has
nearly doubled the number of individual products it offers, to 700 this year
from 400 in 2004. And companies are increasingly experimenting with smaller
packages for sodas, for which customers will pay a higher price per ounce. At
the Harvard Club, there was a 7.5-ounce Pepsi minican, which promised “real sugar”
instead of high-fructose corn syrup, and a diminutive eight-ounce bottle of
Sprite.
“There’s consumers out there that don’t want
to consume too much,” said Regan Ebert, the senior vice president for marketing
at Dr Pepper Snapple Group, in her presentation on how the company markets its
products to Hispanic audiences. The small cans, she said, “do a good job of
solving that need for consumers.”
In
explaining the disdain for sodas — sometimes called C.S.D.s, for “carbonated
soft drinks” — industry executives have noted that consumers these days seem
more interested in healthier or natural products. They are also frank about
other attitude changes that are a threat to their businesses. “Obesity concerns
may reduce demand for some of our products” was the first “risk factor” for
Coca-Cola’s business and profitability listed in the company’s most recent
annual report filed with the Securities and Exchange Commission. PepsiCo and Dr
Pepper Snapple name similar concerns.
“Health
and wellness is a major enduring trend, and each brand has to compete in that
environment,” said J. Alexander M. Douglas Jr., president of Coca-Cola North
America, at a Goldman Sachs investor event in May. He described a “secular
decline in carbonated soft drinks.”
The
changing patterns of soda drinking appear to come thanks, in part, to a loud
campaign to eradicate sodas. School cafeterias and vending machines no longer
contain regular sodas. Many workplaces and government offices have similarly
prohibited their sale.
Bottlers
are feeling the changes. “We’re losing, I would say, 1.5 to 2 percent of our
business every year,” said Harold Honickman, the chairman of the Honickman
group of companies, one of the largest soda distributors in the mid-Atlantic
region.
Mr.
Honickman was an active opponent of the Philadelphia soda tax, though he said
he might have supported a national sugar tax: “People are blaming a lot of the
overweight on sugar-sweetened beverages, but there’s ice cream and cake, and
everything else that adds to the problem.”
For
many public health advocates, soda has become the new tobacco — a toxic product
to be banned, taxed and stigmatized. It’s clear that soda’s calories contribute
to weight gain and obesity, but whether its impact is greater than that of
other unhealthy foods has not been conclusively demonstrated. Nevertheless, the
change is already underway.
“There
will always be soda, but I think the era of it being acceptable for kids to
drink soda all day long is passing, slowly,” said Marion Nestle, a professor of
nutrition at New York University. “In some socioeconomic groups, it’s over.”
Ms. Nestle’s latest book, which will be published this month, is called “Soda Politics:
Taking On Big Soda (and Winning).”
The
subtitle reflects her view that “Big Soda” is an enemy to be vanquished, and
that the industry is already losing ground to its public health foes. Though
the sharpest declines are happening among richer, white populations, Ms. Nestle
said she expected that poor and minority customers would also reduce their soda
intake over time, just as tobacco declines occurred first among educated
consumers and then spread to a larger population.
On board a Coast Guard cutter off the coast of Alaska, a crew
member got water, while the soda machine seemed to have no takers. CreditRuth
Fremson/The New York Times
In
Philadelphia, city officials are proud that the recently published reductions
in childhood obesity seem to be affecting minority children, and not just white
children. The prevalence of obesity among African-American boys declined by
11.3 percent, compared with 8.1 percent for all boys from 2006 to 2013.
Dr.
Giridhar Mallya, who was until recently the director of policy and planning for
the city’s health department, credits that change to the efforts of the public
schools, which educate a disproportionate number of minority children. Schools
have overhauled menus, removed sodas from vending machines and introduced
nutrition education programs.
Donna
Smith, principal of John Wister Elementary School in North Philadelphia, has
been promoting that change for years. Her school is in one of the poorest
neighborhoods in the city — more than 96 percent of its students qualify for
free lunches. When she started there, children often came to school carrying
shopping bags from local corner stores, full of chips and sodas or sugary fruit
drinks.
She
arranged for classroom breakfast service and banned junk food. She went to the
corner store owners and asked them not to sell anything to children in the
early morning. She sent letters home. She told her teachers they could not eat
snacks in front of their students. While schools citywide have changed their vending
machine offerings, her school has no vending machines at all, just water
fountains. She told her students she would do “whatever it is going to take to
get you not to eat that junk.”
Water
on the Rise
The
current anti-soda sentiment has the big soda makers worried. Even diet sodas
are experiencing a sharp decline in sales.
At the
Beverage Digest conference, an entire presentation was devoted to the diet soda
problem. John Faucher, an analyst at J.P. Morgan, described the situation as a
crisis. The health-conscious consumers who chose diet sodas in the past have
become increasingly suspicious of anything that seems artificial. Concerns
about the safety of artificial sweeteners run high, despite scant evidence they are
dangerous. As consumers increasingly see soda as a vice or a luxury,
they appear to be fleeing the category altogether.
“People
go toward diet, and then ‘other,’ ” said Barry M. Popkin, a professor of
nutrition at the University of North Carolina, who has measured the calorie
declines. Lately, he said, people are simply switching to water.
Water
has been the runaway success story of the industry. Gary A. Hemphill, an
industry consultant, projects that in 2017, water will surpass soda in sales
and become the largest beverage category in the United States.
Turning away from soda does not always mean making a healthy
choice. A young customer at a corner store in Philadelphia buys a fruity drink
sweetened with high-fructose corn syrup.CreditJessica
Kourkounis for The New York Times
Less Soda, Fewer Calories
The daily total of calories consumed by children is falling, thanks mostly to changing beverage tastes.
Change in daily calories, 2004 to 2012
+20
+16
-4
-10
-10
-11
-20
-21
-26
-30
-79
-186
Generally,
these companies worry about holding on to customers. The companies are
expanding sales overseas, which has helped buoy their stock performance over
the period. But in the United States, they all worry about losing even
nontraditional drink sales to a competitor. Someone might be a die-hard Coke
fan, but prefer Snapple iced tea to Honest Tea, which is a Coca-Cola brand.
That
anxiety may help explain the industry’s vehemence about fighting soda taxes.
The three largest soda manufacturers have entered
a voluntary agreement that requires each company to reduce the
total number of calories per person it sells by 20 percent by 2025. They have
also made investments in obesity research and have spoken about their
commitment to offering healthy choices.
Executives
at all the companies are eager to point to their lower-calorie and all-natural
products as profitable lines of business. PepsiCo, for instance, often says
that carbonated soft drinks represent only 25 percent of the company’s net
revenue. But the industry still fights any public policy efforts to discourage
customers from consuming sodas. “That’s existential,” said Hank Cardello, a
former food industry executive who is now a senior fellow at the conservative
Hudson Institute.
But
there is another existential threat that could be much more hazardous to the
soda makers than a tax. Historically, beverage preferences are set in
adolescence, the first time that most people begin choosing and buying a
favorite brand. But the declines in soda drinking appear to be sharpest among
young Americans.
“Kids
these days are growing up with all of these other options, and there are some
parents who say, ‘I really want my kids to drink juice or a bottled water,’ ”
said Mr. Hemphill, managing director of research for the Beverage Marketing
Corporation. “If kids grow up without carbonated soft drinks, the likelihood
that they are going to grow up and, when they are 35, start drinking is very
low.”
Change
at the Corner Store
When
Mr. Nutter was fighting the soda tax battle, he kept a bottle of Mountain Dew
and a container with 17 teaspoons of sugar — the amount in the bottle — on the
table in the center of his office. It was a good “conversation piece,” he said,
about the surprising number of calories in a typical soda.
“Who in
their right mind would ever put this much sugar into something you’re going to
drink?” he said.
Now the
soda — and sugar — are tucked away in a back closet of his office. During a
recent interview, he had to ask an intern to hunt them down.
A prop
has been shelved, but the city does seem to have changed. On a recent
afternoon, I visited the Corner Food Market, a store in a poor, largely
African-American neighborhood in North Philadelphia. Fresh apples, peaches,
lettuce and green peppers were displayed on a counter near the front of the
store, in bright green baskets provided as part of a grant program. Signs attached
to the shelves highlighted low-sodium canned goods and whole-grain products.
Rosaria
Diaz, the store’s owner, said the story of her customers’ beverage tastes could
be seen in nine refrigerated cases. At the back of the store were her most
popular items — small, sugary fruit drinks called Little Hugs and the cheapest
soda for sale — made by the Philadelphia-based private-label company Day’s
Beverages. Next was the case of traditional sodas. And then came a similar-size
display of bottled waters — with products sold by a dozen brands. Next fruit
juices, and then fruit punches and iced teas.
A girl buying fruit punch at a corner store in Philadelphia.CreditJessica
Kourkounis for The New York Times
Taped
on the glass refrigerator doors were signs warning customers about the calories
contained in the products inside. “Did you know it takes 65 minutes of dancing
to work off a bottle of soda?” one said. The signs are part of the healthy
corner store initiative sponsored by the Food Trust, a local nonprofit that
works to promote nutritious food and coordinates closely with the city.
(“Choose water!” urged another, handwritten sign.)
Many
urban residents do their shopping in corner stores, and the Food Trust
certifies stores, helping them find and sell healthier foods.
“We
don’t do much with campaigns to decrease soda,” said John Weidman, the
organization’s deputy executive director. “These guys have such small profit
margins that you have to couch everything in terms of, ‘This will help your
bottom line.’ ” In other words, the organization doesn’t urge stores to stop
selling soda. Instead, he said, the goal is to nudge customers toward healthier
options, like water and low-fat milk. “It’s mostly about getting them to try
healthier alternatives,” he said.
Ms.
Diaz’s customers are not health-obsessed. At the front of the store, shelves
were packed with cakes and cookies. There were racks of chips, an array of
candy bars and a popular freezer case of ice cream. “They eat a lot of sweets,”
she said. Tobacco products, too, are a big part of Ms. Diaz’s business.
But Ms.
Diaz said that fresh produce, a recent addition, had been a hit. She restocks
twice a week. And when it comes to beverages, she said water sales were picking
up.
“When
we opened, we didn’t have the flavored water,” Ms. Diaz said. “Now we sell a
lot of them.”
Hanif
Tucker, 17, stepped in and bought a large bottle of Rock Creek soda to take
home. But he said he had cut down on his soda drinking, at the urging of his
football coach. “I used to just drink straight soda all day,” he said. He was
especially fond of cream soda. “I started slowing down about two years ago.”
Now he estimates he has about two sodas a week, and drinks mostly water and
juice. “They said too much soda isn’t good for you,” he said.
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