The first cola-favored drink was invented in America in 1881, and some of the most iconic soda brands were created within the next 15 years, with Coca-Cola of Coca-Cola Company (KO) coming out in 1886 and Pepsi of PepsiCo Inc. (PEP) in 1898. Since that time, soda pop has grown to be a multi-billion dollar industry, and a ubiquitous American beverage choice.
A few years ago, after over a hundred years of unprecendented growth, things began to shift southward for the soft drink industry as public perception of soda began to sour. Soft drinks sales started softening, and "Big Soda" had to figure out how to combat its image problem that stemmed from increasingly negative health affects associated with excessive soda consumption: obesity, poor sexual health, and aggression.
Big Soda on the Childhood Obesity Epidemic: Exercise More
Childhood obesity became a harder problem for the soda companies to ignore, and for the first time local governments began putting consumption restrictions on soda that are reminiscent of those placed on tobacco and alcohol. In May 2012, New York mayor Michael Bloomberg proposed putting a cap on the size of sodas sold at restaurants and other food-serving establishments within the city limits at 16 oz.
In 2012 the major soda companies started feeling the effects, as Pepsi and Coca-Cola posted 1.2 percent drops in revenue. Big soda had a problem on their hands, and if it wasn’t just an image one: they were feeling it in their pocketbooks now too.
In January 2013, Coca-Cola introduced their first an ad-campaign that directly addressed the correlation between the nation’s collective weight gain and their products:
In the ad the company touts the fact that 180 of their 650 products were low or no calorie, specifically highlighting their increasing usage of Truvia over high fructose corn syrup, and their “support” of youth activity clubs like Boys Club of America.
The most interesting aspect of the ad isn’t their assertions about what they are doing to combat childhood obesity, but what the American public should be doing. Around the 1:32 mark in the ad, the narrator reminds viewers that “it’s a common sense fact that all calories count, no matter where they come from – including Coca-Cola and everything else with calories.”
The implication is interesting in that it states an obvious fact without admitting culpability, essentially saying that the obesity epidemic can’t be laid at the feet of soft drink manufacturers because they can’t change the fact that “if you eat and drink more calories than you burn off in you’ll gain weight.”
At that statement, the imagery in the ad suddenly shifts from people enjoying soft drinks to a woman running, presumably shedding the calories from the Coke she had earlier.
It’s a brilliant move, putting the onus of weight loss on consumers. That is, they don’t address the perception that sodas are making people fatter, but rather that they can’t change the simple math that people aren’t exercising enough to burn off the Coca-Cola products they’re enjoying.
The the lobbying wing of soft drink manufacturers, the American Beverage Association (ABA), reiterated this stance when they released a statement on Aug. 5 that attacked an article from the journal Pediatrics called “Sugar-Sweetened Beverages and Weight Gain in 2-5 Year Olds” that drew a link between childhood obesity and soda consumption. The release from the ABA states:
“Overweight and obesity are caused by an imbalance between calories consumed from all foods and beverages (total diet) and calories burned (physical activity). Therefore, it is misleading to suggest that beverage consumption is uniquely responsible for weight gain among this group of children, especially at a time in their lives when they would normally gain weight and grow.”
Past the Obesity Problem, Towards Issues of Sexual Health and Aggression
As Coke fights the perception that soda is contributing to childhood obesity via misdirection, two studies released in August found soda can increase aggression and even impact reproductive health, even in amounts as little as one can a day.
In the first study, mice were given a quarter of their calories in the form of corn syrup (which would be the equivalent of a grown human drinking three cans a day). When these mice were released to interact with another control group of mice, the mice fed corn syrup were 25 percent less likely to reproduce.
In a press release detailing the findings, the senior author of the study University of Utah professor Wayne Potts said in a press release that "This demonstrates the adverse effects of added sugars at human-relevant levels." Between 13 and 25 percent of Americans currently get an equivalent amount of calories from added sugar to those mice in the study.
Soda isn’t just being found to negatively affect health, but behavior as well. On Aug. 16 a study found that children who drank at least a soda a day could increase aggressive tendencies in children, and aggressive tendencies increased along with the amount of soda consumed.
The American Beverage Association responded once again. The same day the study linking childhood aggression and soda consumption came out, they issued a response. The statement denies the validity of the study in establishing a causal link between soda consumption and aggressive behavior, then adds:
“Importantly, our member companies do not promote or market the consumption of soft drinks to children in the age group examined in this study.”
While not saying it explicitly, Big Soda acknowledges that young children shouldn’t ingest their products. Or at least, they’re not marketing to them.
So what’s the solution? Don’t deny the claims outright, but shift the conversation. With the obesity problem , shift the conversation to the need of children to exercise more to burn calories. With childhood aggression, shift the conversation to the fact that children that young shouldn’t be drinking soda anyways (if they do, it’s not their problem – they don’t even market to that age group.)
But rather than try to fix soda’s myriad image problems, Big Soda is branching into other beverage options: water, juice and snack foods. And the trick seems to be working.
For PepsiCo, in the second quarter of 2013, soft drink sales fell 3.5 percent, yet both revenues and profits rose.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer