Trends in U.S. soft drink consumption - demand implications for low-calorie and other sweeteners - U.S. Dept. of Agriculture, Economic Research Service report

Situation and Outlook Report: Sugar and Sweetener, Sept, 1991 by William Moore, Peter Buzzanell

Abstract: The U.S. soft drink industry is the largest single industrial user sweeteners.

Growth in soft drink demand, especially for diet products, has pulled the use of

sweeteners, primarily low-calorie sweeteners. Regular or caloric soft drink demand is also

growing, but at a slower pace. During the 1980's high fructose corn syrup (HFCS) was

substituted for sugar in regular soft drinks largely because of price. Prospects for continued

growth of soft drinks during the 1990's are good. Total use of sweeteners in soft drinks is

also expected to be up significantly by the turn of the century. Less certain is the

composition of sweeteners; reflecting use of low-calorie sweeteners not yet on the market,

substituting aspartame for HFCS, and blending various sweeteners.

Keywords: Soft drinks, low calorie sweeteners, aspartame, HFCS, sugar

Introduction

The U.S. soft drink industry is the largest single industrial user of sweeteners (high fructose corn syrup [HFCS], low calorie sweeteners, and sugar). Soft drink consumption in the United States is currently at record levels and prospects for continued growth during the 1990's are good, especially for the diet sector. U.S. soft drink consumption in 1990 totaled 47.4 gallons per person or 26.0 percent of total beverage disappearance. This contrasts sharply with 1980 and 1970 when soft drink consumption was estimated at 34.1 and 22.7 gallons per person, respectively (figure D-1). Much of the nearly 40 percent growth in per capita soft drink use during the 1980's was spurred by the expansion of diet products sweetened with low-calorie sweeteners, primarily aspartame. Volume growth in the regular (nutritive or caloric) soft drink market was less dramatic. But the sweeteners used in regular soft drinks changed significantly as bottlers, to a large degree, switched from sugar to HFCS. Prospects are strong that the 1990's will also be a decade of continued growth as well as change. Higher per-capita soft drink use levels are forecast for the expanding U.S. population that is expected to top 268 million by the year 2000. Moreover, changing sweetener price structures, the availability of new sweeteners, and opportunities for increased blending of sweeteners, illustrate why the soft drink market should continue as the pace setter for aggregate sweetener demand in the United States. However, the mix of sweeteners demanded is likely to be different.

Soft Drink Market--Recent Developments and Current Situation

According to the Beverage Industry report, soft drink sales increased 3.0 percent in 1990 over the preceding year (2, 11, 19).(2/) Nearly all of the sales growth came from diet and caffeine-free products, up 8.9 percent and 15.9 percent, respectively, over 1989. Without diet products, 1990 sales would have been up less than 1 percent. Total soft drink case volume for 1990 is estimated at 7.9 billion cases with diet soft drinks accounting for 29 percent or 13.9 gallons per capita (table D-1).(3/) Examining soft drink statistics over time provides some signposts as to the direction the market will likely take in the 1990's and in turn the demand implications for sweeteners.

* 1970's--Diet Stagnates, Regular Flourishes. America,

during the 1970's, had a soft drink market which grew at

an average annual rate of 4.9 percent per year. The

decade began with per capita soft drink use at 22.7

gallons (3.1 billion cases) and ended the decade at 33.3

gallons per capita (5.0 billion cases). Regular soft drinks

sweetened with sugar accounted for much of this growth.

Diet usage declined initially, as the Food and Drug

Administration's (FDA) ban on cyclamate in late 1969

left saccharin as the only low-calorie sweetener for soft

drinks. The sector rebounded later in the decade because

of consumer acceptance of reformulated diet soft drinks

(table D-1). * 1980's--Diet Expands; Regular Growth Slows. In the

1980's, the total soft drink market increased an average of

3.5 percent annually, but the diet sector jumped nearly 11

percent per year. Per capita soft drink use began the

decade at 34.1 gallons, and ended the decade at 47.5

gallons, a 39 percent increase (table D-2). During the last

decade U.S. population grew by 25 million to 250 million. Regular soft drinks sweetened primarily with sugar in the early 1980's, then HFCS after 1984, increased from 29.2 gallons per capita in 1980 to 33.6 gollons in 1990. Diet expansion was even more dramatic, jumping from 4.9 gallons per capita in 1980 to 13.9 gallons in 1990. Growth was particularly strong after 1984 when the low-calorie sweetener, aspartame, was approved by FDA for use in soft drinks. Bottlers found that consumers readily accepted aspartame. This, coupled with increased emphasis during the 1980's on diet or "light" foods and beverages, helped spawn the growth of a revitalized diet soft drink market (figure D-2).

Sweeteners in Soft Drinks--Composition and Use Levels

USDA estimates that in 1990 the soft drink industry was the largest market for sweeteners, utilizing an estimated 6.1 million short tons. This included 4.3 million tons of HFCS, about 1.6 million tons of low-calorie sweeteners, sugar-sweetness equivalent, and 0.2 million tons of sugar.(4/) This compares with an estimate for 1980 of 3.7 million tons of total sweeteners comprised of 1.7 million tons of sugar, 0.9 million tons of HFCS, and 1.1 million tons of low calorie sweeteners, sugar-sweetness equivalent. As indicated by these estimates, there was a two-thirds increase in total sweetener use as well as a significant change in sweetener composition.(5/) According to Marow and Dowling about 10 percent of the weight of a typical soft drink is sweetener (10). The major ingredient in a carbonated beverage is water, which is close to 90 percent of weight. Other ingredients, less than 1 percent, are typically flavor, acid (citric or phosphoric), color, carbon dioxide, and sometimes a preservative (sodium benzoate).