Despite falling demand, carbonated drinks dominate beverage market

Packages of Coca Cola and Ciel water in plastic inside a delivery truck in the Zona Rosa neighborhood of Mexico City, Mexico, on April 2, 2014. MUST CREDIT: Bloomberg photo by Susana Gonzalez.

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Packages of Coca Cola and Ciel water in plastic inside a delivery truck in the Zona Rosa neighborhood of Mexico City, Mexico, on April 2, 2014. MUST CREDIT: Bloomberg photo by Susana Gonzalez.

Health awareness is driving the global demand for packaged water high, as sales for carbonated soft drinks continue to decline.

According to a study by California-based market research company Grand View Research and Consulting, packaged water sales are expected to reach $470 billion by 2025.

Despite the surge in bottled water sales, due in part to growing demand for healthier alternatives devoid of artificial sweeteners, industry results show revenue from carbonated drinks is still high compared to packaged water.

Duane Stanford, the Executive Editor at Beverage Digest, a publication that covers non-alcoholic beverages in the US, attributes the revenue disparity from packaged water sales to lower margins that bottled water produce compared to carbonated drinks. Despite high volume sales of packaged water, their value trails that of carbonated soda.

Data from the publication shows that despite a 3.8% growth rate in packaged water sales in 2017 and a comparative growth of slightly above 1 percent in carbonated drinks in 2017, revenue streaming from carbonated soda sales stood at $82 billion compared to $ 24 billion in packaged water sales.

Stanford says beverage companies need to create a balance to accomodate consumer shifting demands.

“Major beverage companies like Coke, Pepsi and Dr Pepper have to continue to find ways to boost the value of the soft drinks they sell while being careful not to get sucked into commoditized, lower-margin bottled water competition,” says Stanford.

Atlanta-based Coca-Cola says it is reshaping its business to embrace the evolving preferences of its customers to provide them the drinks they want.

“For us to grow responsibly in this new world, we must clearly understand the trends, passions, and expectations of the people we serve—and take action to meet them where they are,” said Coca-Cola CEO James Quincey recently.

The company however says it aims to grow across all platforms of its segments, to include both new categories and its premium segments.

According to the study the shift towards healthier options in the US is being driven by growing suspicion among consumers about the possible effects of artificial sweeteners present in carbonated drinks.

"Concerns about obesity and health mean people now want more natural ingredients, drinks with more nutrition and benefits and often less sugar," said Quincey in a letter accompanying the city's sustainability report of 2016.

Last year, the company introduced four new fruit-flavored drinks to its diet coke brand, in a campaign aimed at attracting a new generation of drinkers. Besides adding new flavors the company also reduced the portions of its drinks.