A fundamental shift in health-consciousness is threatening to ship the soft drink industry off to the Stone Age. It’s a monumental task, but here’s a potential successor to America’s beloved carbonated concoction…
Young or old, soft drinks are beverages enjoyed by all.
Admittedly when I was growing up, my insatiable craving for soda led to more than a few unpleasant trips to the dentist… but there was nothing quite like hearing that unmistakable fizz every time you cracked an ice cold can of Coke on a hot summer day.
As I’ve gotten older however, drinking soda pop has become much less frequent — and not simply because I’ve changed my beverage preferences.
Health experts and government officials alike have been waging a war against soft drinks for their link to obesity and other health problems, and as a result, I’ve cut down considerably. I certainly am not alone on this…
The Beverage Digest’s annual report shows sales of carbonated soft drinks dropped 3% in 2013 — the largest drop in 3 years and the third consecutive year of decline.
Even as sugar-free, zero-calorie diet sodas began to infiltrate the market some years back, overall consumption per person has fallen considerably since 1998 when the average American drank a whopping 54 gallons of soda pop per year.
Last year, we drank around 38.6 gallons per person — a drastic reduction in 15 years.
Despite the nostalgic appeal of at-home soda-makers like SodaStream (NASDAQ:SODA) trying to help bring baby boomers back to their childhood, soda sales have continued to decline.
And now that you have people like New York Mayor Michael Bloomberg moving to ban the sale of oversized cups of soft drinks, there’s an even gloomier cloud cast over the industry’s future.
So what have we substituted our cola consumption with?
Good old fashion H20, according to the Beverage Digest.
15 years ago, the average American consumed 42 gallons of water per year. In 2013 the amount jumped to 58 gallons.
The funny thing is, it’s not just still water that we’re drinking more of.
It would appear that while Americans are slowly weaning themselves of empty calories, our thirst for the “fizz” hasn’t let up.
But instead of carbonated soft drinks, we’re drinking a lot more sparkling water.
Best Of Both Worlds
Carbonated or sparkling water is made by dissolving carbon dioxide in water, creating carbonic acid. This process simply adds bubbles — it does not add sugar, calories, or caffeine.
While artificially carbonated water is slightly more acidic than still water, it’s nowhere near as acidic as sugary sodas, which can help explain their rising popularity.
Although it’s impossible to say for sure whether a few short years of decline equates to a slow death for soft drink producers, the growth of water beverages is chipping away at the dominance soda pop has experienced for the past few decades.
As luck would have it, the timing couldn’t be better for one company that has deliberately avoided adding soft drinks to its expansive portfolio.
Top Beverage Stock To Buy Today:
Swiss-based Nestlé (OTCMKTS:NSRGY) is primed to be the titan of water beverages for some years to come.
Coca-Cola (NYSE:KO) may have its popular Dasani and Smart Water products, and Pepsi Co’s (NYSE:PEP) launch of Qua may win some fans…but both their customer bases pale in comparison to the kind of sales that Nestlé’s bottled water division generates.
Nestlé Waters carry 64 brands including Nestlé Pure Life, Poland Spring, Acqua Panna, San Pellegrino, Perrier, Vittel, and Buxton, to name a few.
In 2008, Nestlé Pure Life became the largest bottled water brand in the world when they sold over 5 billion liters.
Even though it’s quoted on the Pink Sheets, Nestlé has a market cap of almost $245 billion — making it the largest food and beverage conglomerate in the world.
While that may surprise some of you, Nestlé purposely chose the lax-regulations of the OTC to avoid having to prepare separate financial statements that must adhere to both international and US standards.
Mercedes-Benz parent Daimler AG (OTCMKTS:DDAIF) and French fashion giant LVMH Moet Hennessy Louis Vuitton (OCTMKTS:LVMHF) are both listed over-the-cayman for the same reasons.
Having said that, when companies become as large as Nestlé, there can be growth challenges.
In its full year 2013 earnings report, the Company stated “minimal to no growth at all” in developed markets, while emerging markets showed “soft growth”. Its 2.72% sales growth in 2013 was the smallest in four years.
The good thing is, the stagnancy has motivated Nestlé to devise a new company-wide platform based on nutrition, health, and wellness as a means of building higher margins on their 8,000 products.
Their water division will no doubt be a huge driver in this new strategy.
2014 marks the Company’s 75th anniversary, and they are investing heavily in new branding and communication for the business.
Now it’s hard to discuss the successes of Nestlé, Coca-Cola, Pepsi, or any other beverage company without briefly mentioning the elephant in the room — water consumption.
The idea of sucking copious amounts of groundwater out of one place, filling millions of bottles with it, and selling them, isn’t exactly business-as-usual without ruffling a few environment feathers.
However, in so long as people see bottled water, still or sparkling, as a convenient and healthy alternative to soda, as well as being the only option for those without access to safe drinking water — a company like Nestlé is going to remain desirable for a long time.
Suffice to say, I still enjoy the occasional cola or root beer…but if given the choice, I’ll reach for a sparkling water without hesitation.
If some investors out there are in agreement with me, then a company like Nestlé should definitely be considered.
- The Taps Are Running Dry In California…Which Makes This Water Stock A No-Brainer
- The Beer That’s Capitalizing On America’s Fastest-Growing Demographic
- A More Sophisticated Palate Is Turning These Top Wine Stocks Into Cash Machines
- Profiting from Earth’s Most Vital Commodity: Water
- How One Company is Set to Profit From Biofuel’s Big Breakthrough