Sugar Crush: Why Diet Soda Sales Have Crashed

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Diet soda is not as popular as it once was. Sales of low calorie soda fell by nearly 7 percent over the last year, while sales of regular soda dropped just over 2 percent, according to a Wells Fargo analysis of Nielsen data.

Though soda is still the most consumed beverage in the United States overall, consumption has been declining for several years. “It used to be carbonated soft drinks were it,” says Gary Hemphill, Managing Director of Research for the Beverage Marketing Corporation, a consulting and research firm. “If you were thirsty, and you wanted something fun and refreshing, that is what you would drink. In the 80’s, you saw it broadening, that’s carried on at an accelerated pace.” But while the industry once hoped that diet soda would be its salvation, but the artificially sweetened soda has begun to contract more quickly than its full-sugar counterpart.

The explanation, experts say, is a combination of consumer’s concerns about health and the rapid proliferation of alternatives. Contemporary consumers are particularly concerned about the safety of artificial sweeteners. According to a report on health and wellness from the Hartman Group, a research and consulting firm that specializes in consumer behavior, as compared to 2007, more consumers in 2013 were concerned about avoiding sweeteners like Saccharine, Aspartame (in Diet Coke and Pepsi), and Sucralose, while those concerned about avoiding salt and refined sugar, dropped.

The report also showed a rise in the number of people concerned with genetically modified ingredients—evidence that concern about soda could be part of a larger trend away from processed foods. “The biggest trend in food, really, is a desire for consumers to move away from things that are very processed,” Hartman Group’s CEO, Laurie Demerit “The drumbeat of trend is increasing and there’s now some other ingredients to fill the gap.”

The proliferation of alternative beverages that have hurt the entire soda industry may have a particular impact on diet soda because so many of the popular options on the market, like vitamin water or coconut water, are low calorie. Other sweeteners like Stevia, a South American herb, seem healthier to consumers because it is natural. Consumers may not have abandoned diet soda all together, they just may be drinking less of it as they sample many different products. This is especially true of Millennials, who like to experiment, says Demerit.

Conversely, the desire to be healthy may have driven people back to regular soda. Demerit says they’ve seen some consumers switch back from diet soda to regular soda because they realize if all soda is bad for them, they might as well drink the one that tastes better when they want to indulge.

This doesn’t necessarily mean the end of major beverage companies, especially as they diversify their holdings—Coke recently took an ownership stake in ZICO coconut water—and work to innovate with natural sweeteners. A spokesperson from the American Beverage Association wrote in an email: “Our industry believes in the soft drink business and sees opportunity for continued innovation and growth.”