Bottled and Canned Soft Drinks and Carbonated Water

SIC 2086

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing soft drinks and carbonated waters. Establishments primarily engaged in manufacturing fruit and vegetable juices are classified in various canned, frozen, and preserved food classifications. Those manufacturing fruit syrups for flavoring are classified in SIC 2087: Flavoring Extracts and Flavoring Syrups, Not Elsewhere Classified; those manufacturing nonalcoholic cider are classified in SIC 2099: Food Preparations, Not Elsewhere Classified. Establishments primarily engaged in bottling natural water are classified in SIC 5149: Groceries and Related Products, Not Elsewhere Classified.

Industry Snapshot

Soft drink companies manufacture and sell beverage syrups and bases to bottling operations that add sweeteners or carbonated water to produce the final product. Independent bottlers work under contract with various soft drink manufacturers and are allotted specific territories to serve. The manufacturers provide the bottlers with syrups and bases and with a variety of business services, including product quality control, marketing, advertising, engineering, and financial and personnel training. In turn, the bottlers supply the required capital investment for land, buildings, machinery, equipment, trucks, bottles, and cases. The soft drink industry sells its product in two forms, packaged and fountain service. With fountain service, the soft drink product is dispensed and served in cups, typically in a restaurant or any location with a food service station.

The carbonated soft drink industry declined 2.1 percent in volume in 2009 to 9.4 billion cases, according to Beverage Digest. The Coca-Cola Company continued to hold the largest market share at 41.9 percent, followed by PepsiCo with 29.9 percent and Dr Pepper Snapple Group with 16.4 percent. Retail dollar value of the industry totaled $73.9 billion.

Coke remained the most popular soft drink in the United States in 2009, with a 17 percent market share. Regular Pepsi and Diet Coke were tied for second at 9.9 percent each. Mountain Dew (6.7 percent market share) and Dr Pepper (6.1 percent market share) rounded out the top five.

Sales in the bottled water sector were also down in 2009, according to a report by Beverage World. Total U.S. sales dropped 2.7 percent to 8.4 billion gallons. Private label brands led in revenue, with $884.3 million in sales in 2009 (excluding WalMart), followed by Aquafina ($763.7 million) and Dasani ($735.0 million). Industry experts blamed the decline in sales on the slow economy and noted that many consumers were opting for tap water to save money.

Background and Development

The soft drink industry began in the mid-1880s with the creation of a syrup that was mixed with carbonated water and served at drug store lunch counters. During the early years, soft drinks were sold only in stores that could provide fountain service. Increasing distribution was tied to building additional syrup manufacturing plants.

With the advent of bottling machinery, soft drinks began to be distributed beyond the town drug store. The first merchant to bottle Coca-Cola was Joseph A. Biedenharn of Vicksburg, Mississippi, who installed a bottling machine in his candy store in 1894. The development of large-scale bottling assisted the proliferation of Coca-Cola, and by 1895, the drink was sold in nearly every part of the United States. An infrastructure of independent bottlers working under contract with Coca-Cola, producing the drink to exact specifications, and distributing it within a specific region, soon became the model distribution method for Coke and was emulated by others.

The 1960s and 1970s brought acquisitions and diversification for Coca-Cola and Pepsi-Cola. In 1960, Coke purchased Minute Maid and later acquired Duncan Foods. The Coca-Cola Company Foods Division was created in 1967 and was later renamed Coca-Cola Foods. Meanwhile, Pepsi-Cola merged with Frito-Lay in 1965, changing its name to PepsiCo but maintaining its beverage division under the name Pepsi-Cola. PepsiCo soon ventured into food service and snack foods with the acquisition of Pizza Hut, Taco Bell, and Kentucky Fried Chicken restaurants.

During the 1980s, as consumers became more interested in health and fitness, the soft drink industry faced stiff competition from the makers of bottled water. In response, soft drink manufacturers developed low-calorie and caffeine-free beverages, such as Diet Coke and Diet Pepsi. The start of the 1990s ushered in a new kind of competition focused on "New Age" beverages such as ready-to-drink teas, fruit juice beverages, and flavored waters. Gatorade, the perennial leader among sports drinks, also saw new competition during the 1990s.

From the simple beginnings of one cola, the soft drink industry exploded into a kaleidoscope of traditional sodas, natural sodas, fruit juice drinks, and various kinds of bottled water. Coca-Cola Classic was the best-selling soft drink in the United States and around the world in the early 1990s, controlling nearly 20 percent of the domestic market and 46 percent of the worldwide market. Coke Classic controlled 19.3 percent of the soft drink market. Pepsi-Cola was the second-best-selling soft drink with a 16.1 percent market share.

A failure to post double-digit growth since the end of the 1980s and an aging U.S. population with changing consumer tastes prompted soft drink manufacturers to aggressively pursue overseas markets. Although no other country has a soft drink consumption rate as high as the United States, many potential areas were targeted for expansion, especially the underdeveloped and highly populated areas of China and India. The Coca-Cola Company was the leader in overseas expansion in the 1990s with nearly 75 percent of its operating profits coming from areas outside the United States.

Total soft drink consumption grew roughly 5.0 percent annually between 1983 and 1989 but slowed to 3.0 percent in 1990 and 1.6 percent by 1991. Even the diet cola market faltered after 1990, losing ground to drinks commonly called New Age beverages. Diet colas, which enjoyed a 10 to 20 percent sales growth rate during the 1980s, decreased to approximately 3 percent per year.

Strongest during the 1980s, bottled water remained a vibrant and growing segment of the beverage market into the 1990s. This industry can be divided into two segments, bulk water and refreshment beverages. Bulk water is nonsparkling water that is consumed instead of tap water, and it represented about 80 percent of the market. Refreshment beverages ranged from water such as Evian to flavored, vitamin-enriched sparkling mineral water like Crystal Geyser. While bulk water usually is bought through a delivery service in five-gallon containers or larger, refreshment beverages are premium, image-driven brands, prepared in smaller containers and sold for both on- and off-premise consumption. These products competed directly with sodas and mixers.

After a decade of double-digit growth, the bottled water market faltered in 1991, showing only a 0.5 percent gain in volume. Analysts blamed the recession and concerns about safety, prompted by the Perrier recall in 1990, for the downturn. The industry began to rebound in 1992 with a 3.7 percent increase in volume and a 3.2 percent increase in sales. By 1993 more than 700 brands of bottled water were produced in the United States at 430 bottling facilities. Another 75 brands of water were imported.

In the face of rising competition from all fronts of the beverage market, both Coke and Pepsi turned to joint ventures with other beverage companies. Pepsi-Cola worked with Ocean Spray to provide all its ready-to-drink beverages, including Ocean Spray Splash, a five-flavor line of fruit sparklers, and Ocean Spray Lemonade. Through this alliance, Pepsi became the exclusive distributor of all Ocean Spray single-serve products.

In a joint venture with Nestle, Coca-Cola created the Coca-Cola Nestle Refreshment Company (CCNR) in 1991 to market ready-to-drink coffee, tea, and chocolate beverages. Nestea Iced Tea, CCNR's first project, was introduced in the United States in March 1992.

Both cola manufacturers also introduced sports drinks, such as All Sport by Pepsi and Powerade by Coke. Sports drinks replenish fluids, minerals, and energy lost during exercise, and the market for these drinks had grown into a billion-dollar retail segment by the late 1990s.

The number of independent bottlers began to decline as major soft drink manufacturers consolidated bottling operations by acquiring independent companies and combining them to make one large operation. For example, by early 1999, the number of Coca-Cola bottlers in the United States had dropped to 96, from 353 in 1980. The mergers of the independent bottlers occurred partly because of the amount of capital and equipment needed to modernize and update manufacturing facilities.

It appeared that there was little room for new products in consumers' hearts in the late 1990s. In a move reminiscent of Coke's disastrous New Coke campaign, Pepsi rolled out a diet cola called Pepsi One in October 1998. Hyped by the company as a better tasting diet cola, sales started strong, with Pepsi One capturing 2 percent of the market. It soon faltered as consumers decided it did not taste all that different from Diet Pepsi. Pepsi One's share soon fell to 1.4 percent of the market.

Aggressive marketing paid off for the industry in the late 1990s. In 1999, American teenagers drank twice as much soda as milk. By contrast, in 1979, those figures were reversed. Alarmed at the trends, educators and legislators in Washington enacted laws keeping soft drink manufacturers from selling products in the nation's schools before and during lunch. Principals at some schools began allowing companies to offer free drinks at lunch, thereby getting around the law. Congress introduced the Better Nutrition for School Children Act of 1999, banning the giveaways. Industry spokesmen said the industry remained neutral on the legislation, saying they were for school choice on the matter. They pointed out that some principals were in favor of the free soft drinks as it kept some students on school grounds eating nutritional lunches, instead of leaving campus to eat at fast-food establishments.

Concerns over excessive consumption among young people, especially in relation to rising levels of obesity, continued into the early years of the new millennium. In 2002, the Los Angeles School Board announced would ban soft drink sales in its schools beginning in 2004. This decision angered industry representatives and trade associations, who pointed out that greater levels of physical exercise would be more effective for combating obesity. By the early 2000s, many schools had established relationships with their local soft drink bottlers in an effort to generate sorely needed revenue to help offset the cost of sporting equipment and various programs and activities.

Within the bottled water market, flavored and "nutritionally enhanced" waters were an especially strong category in the early 2000s. These products were aimed at health-conscious consumers, especially aging baby boomers and women between the ages of 25 and 49. Also known as "nutraceuticals," these drinks were enhanced with a variety of ingredients, including vitamins, herbs, and antioxidants, and were intended to address a variety of health concerns including heart health, vision, blood sugar, and weight loss. Beverage Industry revealed that annual sales of enhanced water skyrocketed from $20 million to $85 million by the early 2000s.

Plans for new products also started to crop up. Although the emphasis in this area was relatively weak in the late 1990s, by the early 2000s it had become a major industry focus and a significant source of competition. In a break from the past, different products were suddenly hot. For example, Pepsi introduced Pepsi Twist, Pepsi Blue, and a Mountain Dew brand called Code Red; Coca Cola unveiled Diet Coke with Lemon, Vanilla Coke, and Diet Vanilla Coke; and Dr Pepper/Seven Up unveiled Dr Pepper Red Fusion. The trend toward colored and so-called "extreme" soft drinks even extended to the restaurant industry, where some restaurants began to offer local or regional niche soft drinks. A few locations even began to produce their own brands of soft drinks on-site.

In 2003, Coca-Cola sold 4.5 billion cases, or 6.7 billion gallons of product. The top sellers were Coca-Cola Classic, Diet Coke, Sprite, Caffeine Free Diet Coke, and Barq's Root Beer. Pepsi sold 3.3 billion cases, or 4.9 billion gallons of product, and its top sellers were Pepsi, Mountain Dew, Diet Pepsi, Sierra Mist, and Diet Mountain Dew. Cadbury Schweppes sold 1.5 billion cases or 2.2 billion gallons of product. Top sellers were Dr Pepper, 7-Up, Diet Dr Pepper, Sunkist, and Canada Dry. The five brands with the highest annual growth were Sierra Mist with 176 percent growth, Sprite Remix with 146 percent, Diet Coke with 122 percent, Mountain Dew Live Wire with 93 percent, and Diet Pepsi with 86 percent.

Although certainly not the largest by volume, the market for bottled water arguably had become the industry's hottest segment worldwide by 2003, with an estimated $8.3 billion in wholesale value. Aquafina was the largest selling brand, with 11 percent, followed by Dasani with 10 percent and Poland Spring with 8 percent.

Although carbonated soft drinks accounted for more than half of all beverage sales by volume in the United States in the mid-2000s, the number of soda cases sold declined in 2005 for the first time in two decades, and the downward trend continued in 2006. After experiencing a 0.2 percent decline in sales volume in 2005, the market fell another 0.6 percent in 2006. Despite the drop in volume from 10.22 billion 192-ounce cases in 2005 to 10.16 billion cases in 2006, the retail value of the U.S. carbonated soft drink sales increased 3 percent to $70.1 billion. The value increase was attributed to slightly higher prices for traditional carbonated soft drinks and the growth of more expensive energy drinks. Industry giants Coca-Cola Co. and Pepsi-Cola Co. took hits with their signature brands as consumers continued to veer away from high-sugar sodas in favor of diet brands or noncarbonated products.

Factoring in all liquid refreshment beverages, including sports drinks and bottled water, Pepsi-Cola actually increased volume 4.3 percent with the help of its Aquafina bottled water. Bottled water was the second-largest beverage category by volume after soft drinks, and bottled water sales surged by almost 10 percent in 2006.

Bottled water continued to enjoy a higher level of acceptance in schools as compared to soft drinks. In May 2006, the beverage industry agreed to phase out nondiet soft drinks from the majority of public schools. As it was, several states had followed California's lead and had already banned the sale of full-calorie soft drinks in high schools, and most elementary and middle schools were already soda-free. From 2004 to 2007, nondiet soda had dropped from 47 percent of drinks sold at schools to 32 percent. With such health consciousness extending beyond the student population, carbonated soft drink companies explored more varieties of diet offerings in addition to expanding further into the sports drink and bottled water markets.

By 2006, both Coca-Cola Co. and Pepsi-Cola Co. had lost market share: Coca-Cola had 42.9 percent of the carbonated soft drink market, and Pepsi-Cola, 31.2 percent. Cadbury Schweppes, on the other hand, third with 14.9 percent of the market share in 2006, gained 0.3 percent in market share and 1.3 percent in volume behind increases by Dr Pepper (1.7 percent volume growth) and Diet Dr Pepper (6.4 percent volume growth).

To combat decreases in their flagship brands, Coca-Cola Co. and Pepsi-Cola Co. introduced more reduced-calorie products. Coke was the clear brand leader with 17.3 percent of the market share, and Pepsi was second with 11 percent of the market. Coca-Cola launched Diet Coke sweetened with Splenda in the second quarter of 2005 and followed in June of that year with Coca-Cola Zero, a zero-calorie cola sweetened with a blend of aspartame and acesulfame potassium (ace-k). The company then added two new zero-calorie line extensions on the Fresca brand in September 2005. Coca-Cola introduced Vault, a hybrid energy soda, in 2006.

Pepsi-Cola Co. also was busy with product launches. Notably, it relaunched Pepsi One sweetened with Splenda. It also released Pepsi Lime and Diet Pepsi Lime, sweetened with aspartame and ace-k. Pepsi-Cola Co. also introduced Frawg exclusively at 7-Eleven stores, which represented the first time a major soft drink company created a new brand specifically for a single retailer. The first apple-flavored, caffeinated soda from a major soft drink maker was available as a Slurpee and a Big Gulp fountain drink, becoming the first 7-Eleven flavor introduced simultaneously as a Slurpee and a fountain drink. Additionally, Pepsi-Cola put the Tropicana brand name in the carbonated soft drink category with Tropicana Twister Soda. In the energy drink category, Pepsi introduced Mountain Dew MDX.

Current Conditions

Soft drink manufacturers struggled at the start of the second decade of the twenty-first century, largly due to the economic downturn, but also due in part to negative publicity in the industry, causing consumers to switch to healthier beverage choices like reday to drink teas and functional waters.

Government action also posed a problem for the soft drink industry. In an effort to reduce obesity in the United States, the U.S. government proposed a tax on sugared soft drinks, and sugared beverages were increasingly unwelcome in certain venues across the country. For example, in 2010, San Francisco's mayor Gavin Newsom initiated a ban on sugared soft drinks, including soda, sports drinks, and artificially sweetened water, in vending machines on city property.

In response to concerns about the health effects of soft drinks on the American public, in 2009, the Coca-Cola Company came out with the 7.5-ounce, 90-calorie "slim can," which was available in Coke, Cherry Coke, Sprite, Fanta Orange, and Barq's Root Beer. The company also launched Sprite Green, which was the first soft drink sweetened with the newly government-approved stevia-based rebaudioside A (reb A). PepsiCo also jumped on the bandwagon and released Pepsi Natural, which was made with sparkling water, natural sugar, caramel, and kola nut extra. Additional efforts to cooperate with government initiatives came when the American Beverage Association (formerly the National Soft Drink Association) announced in February 2010 that major soft drink companies would, in cooperation with the Food and Drug Administration, start listing the calories in their products on the front of the cans as well as on vending and fountain machines. Completion of the project was set for 2012.

The bottled water industry faced its own challenges, particularly in the area of environmental concerns. Opponents rallied against the industry, saying it produced too much waste and harmed the environment. Manufacturers sought ways to use more eco-friendly packaging. For example, in 2010 PepsiCo started shipping its Aquafina water in "Eco-Fina" bottles, which were made with 50 percent less plastic. Recycling efforts also expanded across the country.

Industry Leaders

The Coca-Cola Company was the global leader in the industry in 2010 and owned four of the top five best-selling soft-drink brands in the world (Coca-Cola, Diet Coke, Fanta, and Sprite). By 2009, worldwide sales for the company were $30.99 billion. The company employed 92,800 people that year. Using a franchise system for distribution, Coca-Cola and its subsidiaries sold 3,000 drinks under 500 brand names in more than 200 countries.

Coca-Cola originated in Atlanta, Georgia, on May 8, 1886, when pharmacist Dr. John Styth Pemberton created a caramel-colored syrup in his back yard. He took a jug of the syrup to Jacob's Pharmacy in Atlanta where the product debuted as a soda fountain drink for 5 cents a glass. Thinking that two C's would look good in advertising, Dr Pemberton's partner and bookkeeper, Frank M. Robinson, suggested the name Coca-Cola and designed the now-famous script trademark. Dr Pemberton, in poor health and in need of funds, soon sold portions of his company. Asa G. Candler, a druggist and Atlanta businessman, acquired complete control of the company for $2,300 in 1891.

Candler, along with his brother John S. Candler and two other associates, formed The Coca-Cola Company in 1892. In 1894, the first syrup manufacturing plant outside Atlanta was opened in Dallas, Texas. The following year, two more opened in Chicago and Los Angeles. By 1895, Coca-Cola was available in every state. Large-scale bottling began in 1899 when Benjamin F. Thomas and Joseph B. Whitehead of Chattanooga, Tennessee, obtained the exclusive rights to bottle and sell Coca-Cola. With the financial assistance of John T. Lupton, these men developed a regional franchise bottling system, engaging more than 1,000 bottlers in 20 years.

In 1919, The Coca-Cola Company was sold to Atlanta banker Ernest Woodruff for $25 million. Ernest's son Robert was elected president of The Coca-Cola Company in 1923, when the business was reincorporated in Delaware and 500,000 shares of common stock were sold publicly for $40 per share. The new president led the company for six decades.

Coca-Cola's diversification into the food industry began with the purchase of Minute Maid Corporation in 1960, and the Minute Maid and Hi-C trademarks joined Coke's family of beverages. The company acquired Duncan Foods and formed The Coca-Cola Company Foods Division in 1967, now known as Coca-Cola Foods. In 1986, the company consolidated its U.S. bottling operations, creating Coca-Cola Enterprises (CCE).

To sell its products throughout the world, the Coca-Cola Company divided its operations into two sectors, the North America Soft Drink Business Sector and the International Soft Drink Business Sector. The North American division covers Coca-Cola USA, which operates in the United States, and Coca-Cola Ltd., which operates in Canada. The international division is divided into five operating units that sell throughout the rest of the world. In 2010, The Coca-Cola Company announced plans to buy CCE North America, its largest bottler.

Through Pepsi-Cola North America, a unit of PepsiCo Beverages and Foods North America, worldwide consumer-products giant PepsiCo Inc. held a leadership position within the beverage industry in 2010. In the mid-2000s, the company had annual sales of approximately $35 billion.

The company was first created in 1898. Caleb D. Bradham, a druggist in New Bern, North Carolina, invented the drink and named it Pepsi-Cola, claiming it cured dyspepsia or indigestion. Various owners operated the Pepsi-Cola Company from 1923 through 1963. Under the direction of company president Donald M. Kendall, Pepsi merged with Frito-Lay, the largest snack chip company in the United States, and became PepsiCo Inc. in 1973. Additional acquisitions included Pizza Hut (1977), Taco Bell (1978), and Kentucky Fried Chicken (1986). Although the company eventually divested itself of these three restaurant chains to TRICON Global Restaurants (later renamed Yum! Brands), it continued to make key acquisitions during the early 2000s, including the purchase of Quaker Oats Co. In 2010, PepsiCo acquired two of its largest U.S. bottlers, bringing its annual revenues to almost $60 billion.

The Dr Pepper Snapple Group Inc. (DPS) was formed in 2007 when Cadbury Schweppes separated its business into two divisions, one focusing on soft drinks and the other on candy. Maker of such brands as Dr Pepper, Diet Dr Pepper, 7 UP, Sunkist, Snapple ice tea, and A & W, the Dr Pepper Snapple Group was the third largest soft drink company in America in 2010. Headquartered in Plano, Texas, the company had 2009 sales of $5.5 billion. It was acquired by food industry giant Kraft Foods in 2010.


According to the U.S. Census Bureau, the beverage manufacturing industry employed 177,000 workers in the late 2000s. Employment in the industry was expected to decrease at an average of 0.8 percent annually between 2008 and 2018, reaching 164,100 jobs in 2018.

America and the World

Soft drinks are produced or consumed in nearly every corner of the world. Growing consumption trends can be attributed to rising disposable incomes, falling trade barriers, universal product acceptance, and a rising demand for American consumer goods. In the 2000s, both Pepsi-Cola and Coca-Cola had company-owned franchised bottling plants in more than 120 countries that produce their respective brands within each country, rather than exporting them from the United States.

Research and Technology

Advances in computer technology and automation improved all aspects of the soft drink manufacturing industry from inventory control to "smart" vending machines. Those companies with computerized operations found both increased profitability and improved product quality. One example of a computerized system is a plant-wide automated measurement system used in some syrup manufacturing plants. Working with a personal computer, the automated system can measure nearly every important segment of beverage production, including syrup usage, Brix count (percent sugar), and beverage carbonation. Other system checks include monitoring the purification system for failures and checking the warehouse temperature for the precise dew point.

Another technological advancement could be found on the user end of the soft drink industry, with smart vending machines. These devices use computerized components that keep track of stock supplies, sales patterns, breakdowns, and other conditions, helping to drive revenue and keep costs low.

In addition, in 2010, Coca-Cola North America was testing out its new "Freestyle" fountain dispenser. These touch-screen fountain dispensers would offer consumers more than 100 brands of drinks, including waters, juices, and teas, as well as regular soft drinks, according to Beverage Industry. Euromonitor's Alison Lipson commented, "It's something that will generate interest in the category and possibly if some of those combinations are popular or successful, they might introduce products based on those combinations that customers create out of the machines."

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