Soft drink sales continue to drop, and few have felt the pain as badly as SodaStream SODASTREAM INTERNATIONAL LTD.
. The stock has shed more than 70% of its value since peaking two summers ago, fueled by a sharp drop in the popularity of its beverage makers that turn still into sparkling water.
The soda giants have also felt the pinch. Carbonated beverage sales have fallen for 10 consecutive years since peaking in 2004, according to industry tracker Beverage Digest. Concerns about the indulgent consumption of sugar and corn syrup haven’t helped, but diet soda sales have been falling even harder in recent years.
It’s against this backdrop that McDonald’s MCDONALD'S CORP.
— the world’s leading burger chain — is shaking up its value meal profile. Mickey D’s is starting to sell small combo meals that don’t include a soda. The chain is selling a 10-piece serving of chicken nuggets with a small side of fries for just $2.50. It’s also pairing up the same small side of fries with a double cheeseburger at the same price.
One can argue that this is McDonald’s merely creating even lower price points for entire meals in a desperate attempt to win back customers. Domestic sales have been sluggish since late 2013, so if scaled-back meals without soft drinks selling for half the price of a $5 Subway sub do prove compelling, the chain’s a genius.
It’s also easy to see why this is a brilliant move. After all, what will guests order to wash down these petite offerings? McDonald’s is still going to sell a lot of sodas with these meals, but it’s also probably going to fall well short of its previous fountain sales. After all, there’s no shame in going with a free cup of ice water.
There’s also the ever-expanding line of McCafe premium beverages. There are now smoothies, mocha frappes, and other fancy coffee drinks that will fill in admirably for the soda that used to accompany value meals by default.
It gets worse. McDonald’s is also testing a new “mini meal” in select markets, where a signature burger is paired up with a small order of fries and a small soft drink. Offering a small soda is better than none at all, but using small as the default size naturally eats into the amount of cola syrup McDonald’s will go through.
So, yes, it is happening. McDonald’s used to rely on fountain sales as its juiciest-margin product category, but now it’s taking into account the unwelcome trends working against the carbonated beverage industry.
A decade ago, McDonald’s was criticized for trying to “supersize” value meals that featured large soft drinks. Now it seems to be going the other way. You know it’s bad when even McDonald’s is turning on your syrupy sweetness.
The carbonated beverage industry has its work cut out for itself as it tries to reverse this problematic 10-year trend. Right now, McDonald’s isn’t helping.
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