Soda is one of the most popular drinks in America, with the average person consuming almost 43 gallons of it per year. And when it comes to the business of soda, there are three main players with a majority of the market share: Coca-Cola (KO), Pepsico (PEP), and Keurig Dr. Pepper (KDP).
Last year alone, CocaCola brought in $42 billion in revenue globally. The stock is famously a Warren Buffet-favorite, with the investing legend claiming he's "one quarter Coca-Cola." Though his stake in the company is slightly less; Buffet owns about 9% of the company.
But it's difficult to mention Coca-Cola without also talking about Pepsi, its equally large rival. Both companies own hundreds of other consumer subsidiaries in their portfolios, including Fanta and Sprite (Coca-Cola) and Mountain Dew and 7UP (PepsiCo).
A Generational Problem: Younger People Drink Less Soda
While Diet Coke and Mountain Dew may be enjoyed at most bars or restaurants on any given day, the soda-drinking trend seems to be waning among one key demographic: young Americans. In fact, the number of young people who consumed at least one daily sugar-sweetened beverage has fallen from 80% to 61% in recent years, according to a study by Harvard researchers.
Young adults born into Generation Z, after 1997, are a famously health- and sustainability-conscious cohort with a bounty of beverages to choose from in today's market. Upstart beverages beloved by Gen Z like Poppi, a healthy probiotic soda with zippy branding, are now worth billions. So it's no doubt that Pepsico wants to replicate (and beat) what's already working.
It's no wonder, then, that soda companies are scrambling to revitalize their branding and make their products more appealing to a younger, more skeptical generation.
PepsiCo Is Betting Gen Z Will Love Its New Drink
Starting in January, Pepsico will try to capture the hearts (and palates) of millions with its latest drink. It's intended to take on a Coca-Cola favorite, using "a crisp, refreshing formula with a bite to win share and grow the category," according to the brand's promotional phrasing. It also claims it's going to target Gen Z consumers specifically.
The drink, called Starry, is billed as a Sprite-like (lemon lime) beverage, with eye-catching packaging and a "purpose-driven," mission. Other promotional materials claim the drink will be a "fun escape," and take "steps on sustainability."
Even as soda drinking has declined, Sprite's market share has grown from less than 6% 10 years ago to more than 8% last year, according to data from Statista.
It's worth noting that a recent study found that most Gen Z shoppers prefer to buy from sustainable brands, are willing to pay 10% more for sustainability, and care more about sustainability than brand names.
It's too early to tell whether the message will convert, but this certainly isn't PepsiCo's first take on Sprite. Both Slice and Storm were early attempts to compete with Sprite's iconic lemon lime flavor, and both have since been discontinued. PepsiCo's current iteration, Sierra Mist, can still be found at most major retailers but has struggled with lagging sales, capturing just 0.1% of dollar share.
