Citi: Soda Industry Undergoing 'Big Changes'

In a new report, analysts at Citi Research explained their key takeaways from the 2015 Beverage Forum Conference in Chicago. According to analysts, The Coca-Cola Co KO has positioned itself well for the short-term, but analysts believe the long-term industry-wide changes in the non-alcoholic beverage business could pose a challenge for the company.

Beverage trends
Product innovation was a key topic of discussion at the conference. In the alcoholic beverage space, innovation in craft beer, flavored bourbon and flavored malt beverages has “materially depressed” sales of more traditional lagers and spirits.

Analysts believe that innovation will be a key to success in the non-alcoholic beverage space as well in upcoming years. While Coca-Cola and Pepsico Inc PEP have made strides to expand product offerings in recent years, analysts see increasing demand for “specialized” beverages.

Thirsty millennials
The fastest-growing beverage demographic is millennials, and beverage companies are scrambling to keep up with the group's unique taste. Analysts explain that millennials prefer healthier beverages, customized flavors and packaging and a constant stream of new product offerings.

Coke executive speaks
Analysts attended a talk by Senior Vice President of Coca-Cola’s Sparkling Brands Katie Bayne. Bayne explained that the majority of Coca-Cola’s marketing efforts in 2015 will be focused on the core Coke brand.

Bayne added that Monster Beverage Corp MNST and Keurig Green Mountain Inc GMCR provide “different formats which offer a different pacing of caffeine,” allowing at-home consumers more freedom to customize their caffeine intake.

Acquisition targets
Analysts see The WhiteWave Foods Company WWAV as one potential acquisition target for a larger beverage name and note that they were impressed by Odwalla as well. Analysts predict that Coca-Cola, Pepsi and Dr Pepper Snapple Goup Inc DPS will all likely be looking to make bolt-on acquisitions of start-up brands in upcoming years.