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Carbonated soft drink market is shrinking, MCD shifting gears

My initial reaction to the news that MCD will be selling all soft drinks, no matter the size, for $1 this summer was one of surprise.  While I still maintain that the company is overly-focused on transaction-counts, an article published last night by the Atlanta Journal Constitution entitled, “Soda business shrinks for fifth straight year” may give some indication as to MCD’s reasoning:

  • According to Beverage Digest, the volume of the U.S. soda business declined 2.1% last year
  • The publication believes that many more years of decline are in store for soft drinks
  • Energy drinks and ready-to-drink teas posted slight increases last year, according to Beverage Marketing Corp.
  • Health and obesity concerns continue to hamper full-calorie soda sales

While MCD has sold drinks for $1 in past summers, the promotion this year is lasting 150 days compared to 100 days in years prior and this year drinks of all sizes will be priced at $1.  The concession may serve to effectively take traffic from competitors and fuel the discounting war.  The “ready-to-eat” smoothie market has grown dramatically in recent times, with more than 80% of the consumption growth coming in the last five years, according to smoothiestatistics.com.  There are valid concerns regarding MCD’s ability to sell $4 blended drinks alongside $1 soft drinks, but the respective market trends are indicating a shift from soft drinks to the “health and wellness” segments.

Howard Penney

Managing Director