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    Soft Drinks Aplenty

    Future holds more niche brands and fewer megabrands, expert says.

    ATLANTA and PURCHASE, N.Y. -- The single-biggest trend impacting sales in the beverage industry is health and wellness, according to Gary Hemphill, managing director at consulting firm, Beverage Marketing.

    "People want products that are healthier for them," he recently told USA Today.

    Coke and Pepsi, which together offer about 100 carbonated products in the U.S., have announced the launch this year of rival "functional" no-calorie soft drinks that are beefed up with vitamins and minerals and positioned as "better-for-you" choices.

    Neither company expects the new drinks to dominate sales. Rather, they are meant to serve segments of the market. "The beverage industry has reached an area of specialization," Hemphill explained. "We'll likely see a growing assortment of brands and choice -- more niche brands and fewer megabrands."

    Driving the proliferation of soft drinks is the hope by Coke and Pepsi that they can revitalize sales of carbonated soft drinks (CSDs). Bubbly beverages have lost ground to alternatives, such as bottled water, non-carbonated drinks, including teas and juices, sports drinks and "functional" drinks, laced with nutritional supplements.

    Coke and Pepsi are among the companies with products in these areas, but a large chunk of their sales remain in CSDs, which are struggling. In 2006, U.S. volume sales of the Coke Classic brand fell 2 percent to 1.8 billion cases, according to Beverage Digest. The flagship Pepsi brand dropped 2.5 percent to 1.1 billion cases.

    To replace those sales, the carbonation kingpins are deploying new products, revamped packaging and fresh ad campaigns, USA Today said. Among their strategies:

    Better-for-you bubbly beverages
    The beverage behemoths are testing formulations for carbonated drinks that will be perceived as healthier. This spring, Coke will launch Diet Coke Plus, a no-calorie drink fortified with vitamins and minerals, such as B12 and zinc. This fall, Pepsi will roll out Tava, a caffeine-free, calorie-free drink with added vitamins, including B3, B6 and E.

    As an image booster, Coke now refers to drinks as healthier-sounding "sparkling" rather than "carbonated" in press releases, earnings reports and other communications.

    New no- and low-calorie options
    Coke is betting big on Coke Zero, a no-calorie line of several cola and non-cola flavors, introduced in 2005. It is aimed at younger consumers, particularly men, for whom the "diet" label may be a turnoff. Coke just launched a TV ad campaign for Zero, which is designed to taste like Classic Coke, and expanded the line with Cherry Coke Zero.

    Calorie-conscious consumers, however, will continue to have familiar Coke choices, too, such as Diet Coke and Diet Coke Sweetened with Splenda, the newspaper said. As part of Coke's plan to play up a healthier angle to its no-calorie drinks, it's running new Diet Coke print ads, including one that reads: "99 percent water. 100 percent taste."

    Pepsi has its own expanding arsenal of artificially-sweetened products, as well. In June, it will launch Diet Pepsi Max, a no-calorie soft drink with the popular supplement ginseng and extra caffeine. Also in the lineup with the familiar Diet Pepsi and Pepsi One are Jazz (diet cola) and successful diet versions of Mountain Dew.

    "The big soft-drink companies have made a lot of headway in the research and development in the flavor formulation for diet sodas," said John Sicher, publisher of Beverage Digest. "They're much more skilled at using blends of sweeteners and flavor blockers to more closely simulate the taste of regular or sugared products."

    An array of flavored soft drinks
    Lemon, lime, coffee, cherry, strawberry, vanilla and caramel are just a few of the tastes that have been added to colas. Last summer, Pepsi launched the Jazz line in black cherry French vanilla and strawberries and cream. Caramel cream came out in February. Coke's flavor array includes Diet Coke with Lime and Coke Blak, which has "coffee essence."

    Energy drink/soft drink combos
    These drinks combine the caffeine jolt of many energy drinks with the taste of soft drinks. Hoping to kick up sales, Coke this month expanded its "hybrid energy soda" line, Vault, to include a berry-flavored Vault Red Blitz. Pepsi has a rival drink, MDX, which it promotes as "energy-infused soda," USA Today reported.

    Coke and Pepsi have reaped success with some of the line expansions, though there have been miscalculations, too. Among them was an attempt by both beverage giants in 2004 to market "low-cal" additions instead of "no-cal." In 2004, Coke and Pepsi introduced C2 and Pepsi Edge, respectively, each with half the calories of regular colas. Pepsi Edge is gone; C2 is being phased out, according to the newspaper.

    "What the companies found out is that consumers who want diet soft drinks want zero calories," Hemphill said.

    While the companies may want a drink for every market niche, consumers at some point may be overwhelmed by the decisions. "Choice is always good," said 27-year-old Manhattan resident Ryan Davidson, who is a fan of regular Coke.

    But now, he adds, "It's too much. How many kinds of tooth decay do you need?"

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