Wednesday, September 17, 2014

12067: Soft Drinks & Cigarettes.

From The New York Post…

Soda makers headed down same road as tobacco: analyst

By Richard Morgan

Soda makers, which have seen sales in the US fall for nine straight years, appear more like this generation’s cigarette sector, one Wall Street report contends.

Both sectors are under attack for health reasons and both have seen a years-long decline in sales, the report from Cowen and Co. explains.

More recently, soda makers are “taking a page out of the tobacco playbook by focusing in styles, flavors and price/mix to manage volume declines,” Cowen analyst Vivien Azer writes.

“Youth consumption [of soda] is falling notably, which is unhelpful in terms of driving future volumes,” Azer writes. “What is more, both categories have an outsized exposure to an economically challenged core consumer.”

Azer, in her report, “ Is Soda the New Cigarette?,” acknowledges differences between the products — but gives cigarettes an economic edge for “being dangerous but addictive.”

Soda, by comparison, is easily substitutable — with water being a cost-free option.

To manage volume declines, Azer says, both industries are emphasizing different styles, flavors and mix shifts.

Tobacco’s decades-old flight to filters and nicotine lights, for example, preceded soda’s rollout of diet and decaffeinated drinks.

Flavors encompass menthol, in one instance, and the re-introduction of Fanta, in the other.

Mix shifts have to do with packaging — different colors, designs and colors — all in an effort to engage new consumer niches with a differentiated brand.

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