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Beverage

Soda problems

From the opening piano chords, it sounds like a nostalgic ad for Coke. Video clips show a ’50s soda fountain and a mom shopping, while a voice-over intones, “For over a hundred and twenty-five years, we’ve been bringing people together.”

Suddenly the ad takes a left turn, into a modern-day call to fight obesity, followed by a list of actions Coke is taking to do its part. “All calories count,” concludes the ad, “no matter where they come from, including Coca-Cola and everything else with calories. And if you eat and drink more calories than you burn off, you’ll gain weight.”

You might not notice from the gauzy surface, but the ad, released in January, is the latest salvo in the new soda wars.

This time around, they’re not about Coke and Pepsi battling for market share. They pit the whole industry against a cadre of activists, researchers and public officials, who have labeled its products the latest Public Health Enemy Number One. From New York City to Sacramento, soda warriors are pushing to downsize and tax sodas and other sugar-laden drinks.

“There’s a huge obesity epidemic in this country,” says Julie Greenstein, deputy director of health promotions policy for the Center for Science in the Public Interest, which has petitioned the Food and Drug Administration to regulate added sugars in beverages. “Sugary drinks are the single largest source of calories in the American diet, so they’re a good place to start.”

Beverage companies and other researchers respond that soda is just one among many foods that can pack on pounds. Says Suzanne Judd, assistant professor of biostatistics at the University of Alabama at Birmingham, “There’s no evidence those 300 empty calories are any worse than the additional calories that would come from a honey bun.”

Caught in the crossfire—once again—are restaurants. Soda is the new salt, the new trans-fat, the new tobacco. As on those earlier health issues, restaurants are fighting off new laws, like the Big Apple’s ban on supersized sodas.

But the biggest battle is for the minds and tastebuds of consumers. And there’s no question which side is gaining. For close to a decade, Americans have been steadily defecting to other beverages:

  • Volumes of carbonated soft drink sales have fallen eight straight years nationwide, according to Beverage Digest. In 2012, per capita servings slipped to 701 eight-ounce servings, the lowest level since 1987.
  • Restaurants served up 5 percent fewer sodas in the 12 months ended February 2013, reports the NPD Group. Diners were turning to specialty coffees, up 6 percent, and tap water, up 4 percent.

“Overall, carbonated soft drinks have been declining,” says Debbie Domer, director of platform strategy and marketing for Arby’s. “Consumers are looking for other options. We want to continue to maintain and grow beverage sales, so we want to be able to offer those things.” Last year, the chain launched no-calorie peach green tea, and it’s testing frozen lemonade, smoothies and hot beverages.

“In recent years, people have been slowly gravitating towards other product offerings,” says Gary Hemphill, managing research director of Beverage Marketing Corp., a New York City research firm. “We believe it’s likely to continue.”

What’s ahead in the soda wars, and how can restaurants keep up with their customers’ changing thirsts? Here’s a guide to sorting out the debates—and the business opportunities.

The science of soda. Nobody argues over one set of numbers. From 1980 to 2000, the percentage of American adults considered obese or extremely obese more than doubled, hitting 36 percent, according to the Centers for Disease Control.

But is it fair to single out sodas as the leading cause?

Yes, say soda foes. Over that same span, the average adult took in 278 extra calories a day. Of those, 43 percent came from sweetened beverages.

They note, too, that obesity rates have started leveling off at the same time Americans have cut back on sodas. Between 2000 and 2008, according to CDC data, intake of added sugars dropped from 100 grams a day to 77, with soda responsible for two-thirds of the decline.

“Compelling evidence shows sugary drinks are a significant and unique contributor to the obesity epidemic,” says Harold Goldstein, executive director of the California Center for Public Health.

The unique hazard of liquid calories is that they don’t make you feel full, which means you keep on eating, says Barry Popkin, nutrition professor at the University of North Carolina at Chapel Hill. “When I give you food, you change your intake of other food. When I give you a beverage, you don’t change your food intake.”

Other obesity researchers call such claims overstated. It’s true that obesity rates have paralleled soda consumption, says Kathryn Kaiser, instructor at the University of Alabama at Birmingham School of Public Health. But that doesn’t mean that one causes the other. “Playing basketball does not make you tall,” she says, “although one is highly associated with the other.”

Looking for direct causation, Kaiser analyzed 12 different randomized studies of drinkers of sugary beverages. On average, she found, participants did gain weight – but less than 2 pounds, from drinking as many as 400 calories a day.

“I just don’t see that it has a large enough effect to have a large impact on our current rates of obesity,” she says. “Calories are calories. The calories in soda are not particularly special, powerful calories.”

There oughta be a law—or not. When the soda wars hit New York City, restaurants were in the line of fire. Last year, Mayor Michael Bloomberg pushed through an amendment to the city’s Health Code, banning foodservice establishments from selling sugary drinks in cups larger than 16 ounces. The rule was blocked before it could take effect, by a judge who called it “arbitrary and capricious.”

At the Greater New York City Chapter of the New York State Restaurant Association, spokesman Andrew Moesel was relieved. “While we applaud what the mayor was trying to do,” he says, “the rule did not make a lot of logistical sense as to how it was enforced.”

The rule would cover a restaurant, he notes, but not a convenience store next door selling a Big Gulp. It would cover sodas and coffee drinks, but not chocolate milk or fruit juices.

“This was a trial balloon,” says Scott DeFife executive vice president of government affairs for the National Restaurant Association, which sued to stop the rule. “Hopefully, our efforts in New York will dampen enthusiasm for that kind of approach.”

Bloomberg’s office did not respond to requests for comment, but the city has appealed the judge’s ruling. So far, similar bans have been proposed in only one other U.S. city: Cambridge, Massachusetts.

If you can’t ban it, tax it, say other public officials. The U.S. Department of Agriculture projects that a 20 percent soda tax could prompt adults to drink 37 fewer calories a day. Such bills are afoot in at least 11 state legislatures, though they’ve lost at ballot boxes in Washington, Maine and California.

In California, a bill by State Sen. Bill Monning proposes a new strategy: paying a soda tax into a Children’s Health Promotion Fund. He points to a February Field Poll, in which 68 percent of Californians supported a soda tax, if the proceeds went to school nutrition and physical activity programs.

“It’s a twofold public health strategy,” says Monning. “If you raise the retail cost of these items, data shows it would result in decreased consumption, and it would use the revenue for public health and physical education.”

DeFife labels such proposals “sin taxes,” lumping soda with alcohol and tobacco. “It’s a slippery slope,” he says. “When you get to the point where you’re taxing specific types of foods and beverages, you open a Pandora’s box of issues for the food industry.”

Soda strikes back. As Coke’s Coming Together ad suggests, the beverage industry’s response has been less to refute critics than to deflect them. As their counterparts in alcoholic beverages did a generation ago, soda makers admit a public health problem, but show how they’re helping to solve it, taking a variety of steps to help customers drink in moderation. (Pepsico declined to comment and referred inquires to the American Beverage Association.)

“We as an industry are doing our part to be part of the solution for obesity,” says Chris Gindlesperger, spokesman for the ABA. “We’re putting fewer calories on the market.” He notes that between 1998 and 2010, the industry’s average calories per serving dropped 23 percent.

Ground zero has been in public schools. In 2006, soda giants announced a set of school beverage guidelines, which phased out full-calorie sodas in favor of water, 100 percent fruit juices and sports drinks. Diet sodas were permitted only in high schools.

In just six years, the number of calories shipped to schools dropped 88 percent, according to ABA research. Bottled waters shot up from 12 percent to 39 percent of the product mix.

For adults, the strategy is to foster calorie consciousness. Two ABA programs, coordinated with First Lady Michelle Obama’s “Let’s Move” campaign, are putting calorie labels on cans, cartons and vending machines.

“We’re empowering consumers to make choices,” says Gindlesperger. “If one day I want to have a full-calorie soft drink, and the next day I want to have something with fewer calories, that’s my choice.”

The choice of low-or-no calorie quaffs is steadily growing. Coke touts 180 among the 650 beverages it sells, from Dasani bottled water to Honest Tea. In a milestone of sorts, in 2010 Diet Coke bumped Pepsi out of the number two spot in beverage sales.

To expand choices further, beverage labs are developing artificial sweeteners that taste less artificial. Coke is experimenting with the plant-based stevia. Pepsi has a $62 million partnership with Senomyx, whose products reduce the need for added sugar.

Not that sugar is going away. A recent Coke ad invites consumers to enjoy soda but pair it with exercise. With the slogan “140 Happy Calories,” it suggests laughing, dancing and walking a dog as ways to burn off a 12-ounce Coke.

“All of our beverages can be part of any active healthy lifestyle,” explains Coca-Cola spokesman Ben Sheidler. The ads, he says, “explain, in simple terms, the concept of calorie balance and how people’s level of activity must balance the total calories people eat and drink.”

Coke’s putting its money where its fizz is. The Coca-Cola Foundation has pledged exercise grants of $3 million to Chicago and $4 million to its home state of Georgia. The parent company is building 100 community fitness centers nationwide.

Restaurants: reinventing beverages. Can restaurants break their addictions to soda’s profit margins? Technomic reports the average gross margin for all beverages is 78 percent, compared to 64 percent for food.

There’s good reason to try, says Hank Cardello, a former Coke executive who’s now a senior fellow at the Hudson Institute in Washington. In a February study of 21 chains, he found that servings of low-calorie beverages jumped 220,026 over five years, while traditional beverages fell 201,890.

“There are consumer segments out there that want lower-calorie products,” says Cardello. “That’s your growth customer. If you don’t pay attention, you’re leaving money on the table.”

It’s good money, too, says Bonnie Riggs, restaurant industry analyst for NPD in Rosemont, Illinois. Her surveys find consumers willing to pay $3 for a specialty drink like strawberry lemonade or iced coffee, compared to $1.69 for a soda.

The key is to offer beverages they can’t get elsewhere, says Riggs. “They’re all things you cannot make at home or get at a retail store for a lower price.”

How can you wean your menu away from soda? These four chains take very different approaches:

Arby’s: got milk, kids? After consumer research with moms, the 3,400-unit Atlanta-based sandwich concept revamped its kids meals, offering a choice of low-fat milk, Capri Sun fruit juice or bottled water. Parents can ask for sodas, but only 44 percent do.

Milk’s the most popular choice, says Domer. “Parents want wholesome options out there they can give their kids and feel good about it. When parents are trying to decide where to go, it helps them choose Arby’s.”

McAlister’s Deli: tea-ing up. When the first McAlister’s opened in Oxford, Mississippi, it offered a Southern-style sweet tea. Today, tea makes up 67 percent of beverage sales at its 310 stores. CEO Frank Paci chalks it up to crystal serving glasses, filtered water and brewing it strong, for pouring over ice—as well as servers who routinely ask, “Would you like a sweet tea with that?”

McAlister’s offers fountain sodas as well, but Paci notes, “We sell more Diet Coke than Regular. If you want a caffeinated beverage, you’re going to buy our iced tea.”

Cosi: seasonal mixology. Cosi’s 124 units, based in Deerfield, Illinois, take a cocktail approach to booze-free beverages. Michael Foley, vice president of culinary and strategic innovation, designs drinks to pair with the fast casual chain’s light fare, like flatbread sandwiches and pizzas.

“In our beverage program, we’re looking to develop this mixologist’s idea,” he says. “We put together a little fruit juice and tea with acids and citruses. A touch of acid is important. If the drink is too flat in flavor, the food doesn’t stand out.”

The menu changes by season, and so do the specialty drinks. Spring and summer bring mango pomegranate lemonade and green apple tea. Flavors get more robust in the fall, with honey pear cider and pumpkin spice lattes.  

LYFE Kitchen: nutritious nips. At this healthy fast casual concept, with two California locations, executive chef Jeremy Bringardner’s goal is no empty calories, which means no fountain drinks. His fresh-made sodas mix herbs and berries, like strawberry-basil and blueberry-rosemary.

Other light drinks run from water infused with chia seeds to a cooler that purees cucumber with mint, lime juice and agave syrup. “I leave all the fiber in there,” says Bringardner. “It’s nutrient-dense.”

Even beverages that aren’t light pack a nutritional punch, like his best-seller: a 202-calorie kale-banana smoothie. A cup of the bitter greens with frozen bananas, apple and lemon juices, with touches of ginger and cucumber. Says Bringardner, “It’s a... way to get people to enjoy a cup of raw kale.

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