Soda sold in glass bottles, a package generally phased out decades ago, is providing a rare spot of growth in a declining soft-drink industry

June 23, 2013, 9:06 p.m. ET

Glass Bottles Lend Pop to Soda Makers

By PAUL ZIOBRO

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The clink of soda in bottles is helping to offset soft drink sales declines in the U.S. Soda sold in glass bottles, a package generally phased out decades ago, is providing a rare spot of growth in a declining soft-drink industry. Over the past two years, sales growth of soda in glass bottles has outpaced that of soda in the much-more-common plastic bottles and aluminum cans, according to Nielsen, whose data include supermarkets, big-box stores and other outlets, but excludes sales from other sources, like Costco Wholesale Corp. and convenience stores.

The trend comes as soda companies—including the top three players, Coca-ColaCo., KO +1.61% PepsiCo Inc. PEP +1.55% and Dr Pepper Snapple Group Inc.DPS +0.35% —have recognized the need for a broader selection in the packages, sizes and prices for a category that has been losing ground in the past eight years.

Glass was the original portable packaging option during soda’s early days in the late 1800s, but metal and aluminum cans started to gain traction in the 1960s, followed by plastic bottles in the late 1970s. Coca-Cola’s introduction of a 20-ounce plastic version of its iconic contoured bottle helped push aside glass as a major soft-drink package, says John Sicher, publisher of Beverage Digest.

Today, glass bottles account for just 2% of the $21.2 billion in soft-drink sales tracked by Nielsen, so soda makers are hardly counting on glass to fix the soda industry’s major challenges, which include the threat of more regulation and consumers cutting back on sugar intake.

But glass bottles do serve a strategic purpose. Executives say they hold unique appeal to key demographic groups like millennials, baby-boomers and Hispanics. Perhaps most important of all: soda in glass bottles sells for a steep premium compared with other packages, providing a boost to profits.

Sales of soda in glass bottles rose 2.6% for the 52 weeks ended April 13, while plastic bottles fell 0.8% and aluminum cans fell 1.9%, according to Nielsen.

Overall, soda sales fell 1.4% during the period. In the year prior to that, all three formats were up, though a 4.5% gain in glass-bottle sales was well ahead of the 2.5% increase in plastic and 1.4% increase in cans.

Coca-Cola’s image is much more intertwined with glass than PepsiCo’s is. Coke’s famous, patented bottle shape was introduced in 1915. Several years ago, Coca-Cola began to focus on having a broader selection of packages and sizes, an effort that included increasing the availability of its glass bottle.

“The Coca-Cola glass contour bottle is part of our brand’s DNA and has been for decades,” Coca-Cola spokeswoman Susan Stribling said.

PepsiCo is playing from behind in the glass game, without a “concerted effort” at retail for at least seven years, concedes Simon Lowden, chief marketing officer of PepsiCo’s North America beverage business.

This year, PepsiCo is conducting a national rollout of 12-ounce glass bottles, designed with a distinct swirled base, of its namesake cola and Mountain Dew, both which are sweetened with sugar instead of high-fructose corn syrup that is used primarily in the U.S. The products are available in nearly a third of the U.S. right now.

Mr. Lowden says that nostalgia makes it an appealing factor for older consumers, while younger shoppers see the glass bottles as having a cool factor. Among those two demographics, one-third said that glass bottles would make them buy more soda.

“I couldn’t imagine two more different lifestyle extremes,” he said in a recent interview, yet glass bottles are “very appealing and different to both cohorts.”

The glass bottles are part of a number of new packages being offered by PepsiCo. The company also is offering variety packs that combine cans of its namesake cola and Mountain Dew, among other flavors, and also recently launched an aluminum wide-mouth bottle for Mountain Dew.

PepsiCo’s glass bottles are the premium offering of its new packaging options. At $3.99 for a four-pack, PepsiCo’s glass bottles are priced nearly four times higher on a per-ounce basis than a 12-pack of canned soda, which sold for an average of $3.50 per pack last year, according to trade publication Beverage Digest.

PepsiCo, like Coca-Cola, has been available in glass bottles in the U.S. as an import from Mexico, but PepsiCo is making a move to have its own mainstream package with broader distribution, much like Coca-Cola has done.

Dr Pepper offers only a few of its brands in glass, including its namesake soda, Crush and Stewart’s root beer. In addition to being a premium play, Dr Pepper sees glass as attracting Hispanics, since soda is sold widely in glass bottles in Mexico and other Latin American countries, a spokesman said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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