by Quentin Fottrell
April 15, 2013

from MarketWatch Website

 

1. “The hottest new beverage is water”

People aren’t losing their thirst, but they are going back to basics.

Water is one of the fastest-growing segments of the beverage industry, studies suggest, while sales for traditional fizzy drinks are on the decline. From 2009 to 2011, sales of regular soft drinks declined by 1.9% to $27 billion, according to a 2012 report from market research group Mintel.

“It would seem that the category has seen its peak and is now retreating,” the study reported. (Consumers are choosing more low- and no-calorie beverages, says a spokesman for the American Beverage Association.)

The decline is part of a shift in consumer tastes.

From 2001 to 2011, annual bottled-water consumption soared 56% to 26 gallons per person - the equivalent of 166 of those typical 20-ounce bottles - according to the Beverage Information Group and the U.S. Census. At the same time, annual soda consumption fell 16%, to 44 gallons (about 281 single-serving bottles) per person.

Indeed, many soda makers now also own bottled-water brands. Coca-Cola KO +5.08% owns Dasani, PepsiCo PEP +0.58% owns Aquafina, and Dr Pepper Snapple DPS +1.43% owns Deja Blue.

While fizzy-drink sales may have lost their fizz, soda isn’t going away any time soon. A decade ago, 80% of Americans consumed at least one such beverage every two weeks, says Harry Balzer, chief industry analyst for market research firm NPD Group.

Today, 72% continue to do so.

“Soda is still a very popular part of the American diet,” he says. “More Americans drink soda than drink energy drinks and coffee.”

2. “Coke made Santa fat”

Coca-Cola has been often credited with creating the modern image of Santa Claus: The rosy-cheeked fellow with plenty of girth appeared as part of its advertising as early as the 1930s.

The old-fashioned version of St. Nicholas, the European saint on whom Santa is based, is depicted as more svelte.

But amid growing concerns about rising obesity rates, Santa’s size has begun to take on a new implications.

“Soda continues to be blamed for obesity, and proponents of obesity-reduction programs continue to clamor to tax the beverage,” the Mintel report states.

Do soda companies use charity to quiet critics?
A new study finds that soda companies, via philanthropic activities, curry favor with the doctors, dentists and dietitians who critique their products.

MarketWatch's Quentin Fottrell reports.
 

 

Rising consumption of sugary drinks has been a major contributor to the obesity epidemic, according to a 2012 report published by the Institute of Medicine.

Some 26% of American adults defined themselves as obese in 2011, according to the Well-Being Index calculated by market research group Gallup and health-care consultancy Healthways.

And too much sugar consumption is one of the most direct causes of Type 2 diabetes, says Margo G. Wootan, director of nutrition policy at the Washington, D.C.-based nonprofit Center for Science in the Public Interest. In fact, drinking one to two sugary drinks per day increases the risk of Type 2 diabetes by 26%, a 2010 study published by the Diabetes Journal found.

The industry disputes the idea that such studies prove that soft drinks are a major part of or even cause the problem.

“None of the studies say that drinking a soft drink will make you obese,” says Christopher Gindlesperger, a spokesman for the American Beverage Association.

But he says that the soft-drink industry has nonetheless responded to these concerns and significantly reduced the amount of sugar in drinks:

45% of soft drinks sold now have zero calories, and the average calorie count per serving has fallen 23% since 1998.

“It says a lot for consumer tastes and what our companies are doing,” he says.

A spokeswoman for Coca-Cola says the company has helped reduce the number of “beverage calories” sold in schools by 90% since 2006, when Coca-Cola joined the Alliance for a Healthier Generation - a joint initiative of the William J. Clinton Foundation and the American Heart Association - to create a new school-beverage policy in the U.S.



 

3. “Diet drinks aren’t health foods”

The bad news:

Diet soda may not be good for you either.

One recent study by French researchers published in The American Journal of Clinical Nutrition found a strong correlation between diet drinks and increased risk of Type 2 diabetes.

Women who drink “light” beverages tend to consume 43% more than women who drink normal sugary drinks - the study found. Furthermore, when consumed in equal quantities, artificially sweetened drinks were associated with an increased risk of developing diabetes.

But correlation isn’t causation. These studies don’t rule out that factors other than artificially sweetened beverage consumption are responsible for the association with diabetes, says Christopher Gindlesperger of the American Beverage Association.

He says other factors play a role:

According to the National Institute of Diabetes, for example, those at greater risk for Type 2 diabetes include people in certain ethnic groups, those who are overweight or those with a family history of diabetes.

4. “We’re caffeine-dependent”

Energy drinks are the new kid on the block in the beverage industry, stealing market share from traditional sodas, experts say.

In fact, sales of energy drinks are expected to grow from $12.5 billion last year to $21.5 billion by 2017, according to the market research group Packaged Facts. Soft-drink companies have their own energy brands.

Coca-Cola sells NOS, PepsiCo has Amp Energy and Dr Pepper Snapple owns Venom Energy.

But the caffeine content of energy drinks has caught the attention of the Food and Drug Administration.

The FDA caps permissible caffeine levels in soft drinks at 200 parts per million, or 0.02%, which is the equivalent of around 72 milligrams in a 12-ounce can.

However, there are no such restrictions on energy drinks and, an FDA spokeswoman says, some may contain more than the FDA’s recommended allowance per serving.

“To date, no regulatory limit has been set for the amount of caffeine in other types of drinks, although the FDA has received several petitions requesting such a regulation,” a spokeswoman says.

One 16-ounce can of Monster Energy, one of the most popular energy drinks on the market, has around 160 milligrams of caffeine (vs. 38 milligrams in a 12-ounce can of Pepsi) and it isn’t unusual for users to consume multiple drinks in a day.

Tammy Taylor, a spokeswoman for Monster Beverage, points out that the drinks contain half the caffeine of many large coffees.

Indeed, a grande (16-ounce) Starbucks coffee has 330 milligrams of caffeine, and a 16.5-ounce Panera frozen mocha has 267 milligrams, according to the nonprofit Center for Science in the Public Interest.

5. “Caffeine and alcohol make a dangerous cocktail”

Too much of something is rarely a good thing - especially when it comes to uber-caffeinated energy drinks.

The number of people showing up at emergency rooms reporting symptoms like racing heartbeat, seizures and headache after drinking energy drinks soared from 10,000 to more than 20,000 from 2007 to 2011, according to a survey of hospitals released last month by the federal government’s Substance Abuse and Mental Health Services Administration.

Most of those visits were made by teens or young adults, it said.

“We’re seeing more and more people coming in with these issues, especially young people who are mixing their energy drinks with alcohol,” says Tom Sugarman, emergency physician and spokesman for the American College of Emergency Physicians.

And it’s not just youngsters:

Sugarman recently gave advice to a mother who complained that her baby never slept; it turned out, she was drinking energy drinks while breastfeeding.

“That’s going to go straight to baby,” he says.

Energy-drink manufacturers take issue with the ER-visit study.

A spokeswoman for Monster Beverage says it’s,

“highly misleading and does not support any conclusion that energy drinks are unsafe for consumers.”

And as an official statement by the American Beverage Association points out:

“The report shows that 42% of the reported ER visits were by someone who had admitted to consuming alcohol or taking illegal substances or pharmaceuticals… And the consumption of those substances along with energy drinks means the energy drinks may be irrelevant.”

6. “We’re the last drink some people ever have”

Because many energy drinks are considered dietary supplements, the manufacturers are required to report fatalities with potential connections to the products to the FDA.

As of March 6, 2013, there was one report of an individual who drank the dietary supplement and energy drink Rockstar Energy before dying; 13 reports of deaths involving possible involvement of 5-Hour Energy; and eight death reports mentioning Monster.

Monster is changing its label to a conventional food, but it has told the FDA that it intends to continue to voluntarily file adverse event reports after the conversion.

There’s no way to know, of course, whether the drinks and the fatalities are causally connected. Maureen Beach, a spokeswoman for the American Beverage Association, says energy drinks have been “enjoyed safely” in the U.S. for more than 15 years and around the world for over 25 years.

5-Hour Energy - which is not a member of the ABA - is a 1.93 fluid ounce “shot” rather than a “drink” and is only marketed to adults as a dietary supplement, says Elaine Lutz, a spokeswoman for 5-Hour Energy.

Both Monster and 5-Hour say the filing of such reports doesn’t mean a product caused the fatality. Lutz says 5-Hour doesn’t market its products to children and does not recommend individuals take more than two shots a day (spaced several hours apart).

Rockstar Energy did not respond to requests for comment.

7. “We like big cups and we cannot lie”

In March, a New York State Supreme Court justice overturned New York City Mayor Michael Bloomberg’s plan to prevent restaurants, food carts, delis, sports stadiums and movie-theater concession stands from selling sugary drinks in cups larger than 16 ounces - much to the dismay of many public health advocates.

The Bloomberg administration plans to appeal the decision, but experts say even if the ban on supersize sodas succeeds, retailers will find a way around the ban in, well, a New York minute.

Before the ban was overturned, Dunkin’ Donuts unveiled signs telling customers that they could add their own sugar and “flavor swirls” to large and extra-large beverages, which could effectively help customers get around the rule.

A spokeswoman for the company says all Dunkin’ Donuts restaurants in New York City were prepared to comply with the New York City beverage regulations.

Preparing special condiment stands for customers to add their own flavor or sweeteners, she says, was primarily designed,

“to eliminate as much confusion as possible.”

Scott DeFife, head of government relations at the National Restaurant Association, says the ban itself made little practical sense.

For instance, customers at Brother Jimmy BBQ, a chain of southern-style restaurants in New York, would still have been able to order giant pitchers of cocktails like margaritas - and as many ribs as they can eat - and simply order their 24-ounce drinks by buying several smaller cups, he says.

Plus, 7-Eleven’s massive “Big Gulp” drinks would have been exempt from the ban, as most convenience stores and supermarkets are beyond the city’s regulatory reach.

8. “Our deep pockets will veto a soda tax”

When efforts by public-health advocates and senate leaders to consider new federal taxes on soda and other sugary drinks escalate, experts say, so does the lobbying spending of soda companies.

Between 2005 and 2009, as public-health advocates were making a big push to tax soda at the national level, lobbying spending by the soda industry rose more than 30-fold, to $40.3 million in 2009, says Michael F. Jacobson, executive director of the Center for Science in the Public Interest.

That spending effort contributed to the defeat of the proposals at the national level, Jacobson says.

Between 2009 and 2011, legislatures in several states and cities across the U.S. - including Philadelphia, Texas and Washington, D.C. - considered implementing a soda tax, but most of those were also rebuffed, and lobbying spending has tapered off since then.

The amount of money spent by Coca-Cola, PepsiCo, and the American Beverage Association fell to $10 million in 2011, Jacobsen says.

The soft-drink industry says its lobbying efforts also go toward other issues, like agriculture, tax, nutrition and transportation.

“We were reacting to the situation we found ourselves in,” says Christopher Gindlesperger, the spokesman for the American Beverage Association.

He says it’s important to advocate on behalf of consumers,

“about discriminatory proposals like taxes and bans.” (Coca-Cola declined to comment and PepsiCo did not respond requests for comment.)

9. “Our charitable donations wind up in strange places…”

A report released in March by the nonprofit Center for Science in the Public Interest says that soda companies donate to charitable causes that might otherwise be highly critical of the industry.

The report alleges that the industry’s donations to two major anti-hunger groups, the Food Research and Action Center and Feeding America, for instance, raise questions about those agencies’,

“longstanding ties to food and beverage companies.”

Such relationships between corporations and nonprofits, some public-health advocates say, can create a conflict-of-interest gray area.

Case in point:

These two groups stand alongside the soft-drink industry in opposition to regulations that would bar the use of the Supplemental Nutrition Assistance Program - formerly known as food stamps - to purchase sugary drinks, says the CSPI’s Jacobson.

Critics wonder whether these organizations support the use of SNAP benefits to purchase soda if they weren’t getting donations from the soda industry.

In separate statements, both groups say they’ve consistently opposed restrictions on SNAP because there are better ways to tackle obesity. Furthermore, they say, accepting donations from the beverage industry doesn’t contradict or compromise their missions.

A spokesman for Coca-Cola says the company spent $45 million on community organizations last year.

“The suggestion that our community philanthropic efforts are motivated by something other than goodwill is grossly inaccurate,” she says.

A PepsiCo spokeswoman says the company supports,

“a wide array of organizations that work in the communities” it serves.

10. “…including with doctors and dentists.”

The very organizations that should be giving tips advising people to drink more water and less soda are also accepting money from soda companies, according to the study by the Center for Science in the Public Interest.

It says the soft-drink industry has given money to groups representing doctors, dentists and dietitians, which it alleges has made it more difficult for them to give impartial advice.

“Beverage companies are using strategic philanthropy to protect their images and profit,” the study reports.

For their part, soda companies say that they don’t give donations with the intention of silencing potential critics.

In 2009, Coca-Cola paid $600,000 to the American Academy of Family Physicians (AAFP) to help create a website advocating healthy diets.

Glen Stream, board chair of the AAFP and a physician based in Spokane, Wash., describes the partnership between Coca-Cola and the AAFP as a “consumer alliance” and says Coca-Cola provides no editorial control.

“There is an absolute firewall from the funding source that comes from Coca-Cola and the information that is provided,” he says. “We would support taxes on sugary beverages if the tax were actually high enough to affect consumption.”