--:-- Sean Rameswaram: Welcome to Today Explained. I'm Sean Rameswaram, and we're talking about the soda wars. Dr Pepper has finally overtaken Pepsi as the second-bestselling soda in the US.
--:-- Sean Rameswaram: For as long as anyone can remember, it's been Coca-Cola versus Pepsi. Coca-Cola versus Pepsi stands out in the history of marketing. It's one of the great, great fights between two birds. But this year, there's a doctor in the house. New data shows that Dr. Pepper finally outsold Pepsi in 2023, becoming the country's number two soda brand.
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--:-- Sean Rameswaram: It is the number one soda in many of our hearts. And now we can say Dr. Pepper is the number two soda in the nation. Coming up on today, explain how Dr. Pepper beat out Pepsi and how the good doctor helps us understand all those dirty and healthy sodas we're seeing and the overall explosion in our beverage industry.
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--:-- Sean Rameswaram: Support for this show comes from ServiceNow. AI is only as powerful as the platform it's built into, don't you know? That's why it's no surprise that more than 85% of the Fortune 500 use the ServiceNow AI platform.
--:-- Sean Rameswaram: Dwayne Stanford is the editor and publisher of Beverage Digest, which means he knows a lot about soda pop. Yeah, what's really interesting is that Dr. Pepper actually predates Coca-Cola and PepsiCo. Whoa! Yeah, people don't realize that, but it was founded about a year before Coca-Cola and about eight years before Pepsi.
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--:-- Dwayne Stanford: And it was found in much the same way. You know, this was back in the late 1800s. Back then, it was commonplace for pharmacies to have soda fountains, places that town's youths could kick back, relax, and throw back a couple of caffeinated cold ones. So you took a bunch of fruit extracts and sweeteners, you mixed it with carbonated water, and you served it to customers over the counter.
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--:-- Dwayne Stanford: And a lot of times it was an elixir, a tonic, something to make you either uplift you or to make you feel better. And in some cases, people thought it might cure ailments, etc. It was at a pharmacy because it was healthy, quote unquote. Exactly. That's exactly right. What a time. To be alive. Exactly.
--:-- Sean Rameswaram: And this was before the times that soft drinks were bottled and made much more ubiquitous as a result. So you had a pharmacist named Charles Alderton. He was in Waco, Texas. Everybody remembers Waco, Texas from various controversial news over the past. Not for this. Not for this. This is what Waco was known before. It was the Waco of the 90s. Good evening, friends. It has been over 36 hours now since federal agents first confronted a heavily armed religious cult near Waco. They were met by a hail of gunfire, killing four of the agents and wounding over a dozen others.
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--:-- Sean Rameswaram: And he basically took these 23, 23 extracts and sweeteners, mixed it up and created what he what was called a Waco by consumers at the time. And later, in short order, renamed Dr. Pepper. How does Dr. Pepper go from some regional concern to beating out Pepsi? I imagine that took what, like a century?
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--:-- Dwayne Stanford: It took a century, yeah. It took many, many years. And the brand had a strong following in Texas, of course, where it was founded. And it's almost like in some places in Texas, who knows, you might even find it coming out of the faucets. That's how ubiquitous the drink is. Oh, God.
--:-- Sean Rameswaram: And so over time, they built a following in the southeast, you know, in southern states. You know, there was a period decades ago that the company was in a lot of financial trouble, got itself out of that. And then in the last several decades, there's been a couple of key developments that really propelled that brand along and helped create what it is today.
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--:-- Dwayne Stanford: one of the key things that happened was a court ruling back in the 1960s like 1963 a judge in Texas said you know what dr pepper is not a cola dr pepper is something different and the reason that was important because at the time once people started bottling soft drinks and the coke and pepsi were selling franchise territories to independent business people to bottle the products and sell them more widely, these were exclusive franchise territories.
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--:-- Dwayne Stanford: And so the position of the major soft drink companies at the time was that Dr. Pepper would be a competing product. And you can't sell a competing product if you have an exclusive franchise territory. Well, this ruling basically said, nope, not the case. This is a whole different beast, whole different drink. It does not interfere with your franchise agreements.
--:-- Sean Rameswaram: And so that sort of was a key unlock then for Dr. Pepper to branch out from there. And then at some point, there was the realization that the Coca-Cola franchise distribution system and the Pepsi franchise distribution system were very powerful and they could actually create more scale and Dr. Pepper could become more ubiquitous by getting itself into those two systems.
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--:-- Dwayne Stanford: And so then you We had a situation where Coke and Pepsi began distributing Dr. Pepper, the competitor, in various parts of the country. And then the rest is, you know, as I say, history from there in terms of the growth that Dr. Pepper's been able to achieve on the back of the Coke and the Pepsi system.
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--:-- Sean Rameswaram: And all this time I thought Coke owned Dr Pepper So Dr Pepper thrives because it not a cola Our colleague Wizzy wrote an article about this that inspired us to make the show today, actually.
--:-- Amy McCarthy: And in it, she talks about how people can't quite agree on what Dr. Pepper tastes like. Someone on Reddit said it tastes like a sexy battery. Yeah, and there's probably comments, too, that make it sound much better than that, of course. But, you know, it's what we call in the industry parlance a pepper drink. A pepper drink.
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--:-- Amy McCarthy: A pepper drink. You've got colas. You've got lemon lime. Starry. It's a new lemon lime soda that's crisp, clear, and... So refreshing. And you've got citrus, which is like a Mountain Dew. Doot-doot. And you've got orange sodas like Fanta. Who loves orange soda? Kel loves orange soda. Oh, yes, oh, yes, oh, yes, it's true.
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--:-- Amy McCarthy: And then you have pepper drinks. And really, there's not many pepper drinks. There's Dr. Pepper and then there's Mr. Pibb, which Coke created years ago to compete with Dr. Pepper. Right. Especially in those places where Dr. Pepper couldn't be served. Mr. Pibb is not a cola, not a root beer. It's an easy new soft drink from the Coca-Cola company. It goes down good.
--:-- Sean Rameswaram: So pepper drinks are just, they have this spicy character. Spicy. But not so much like a hot pepper spicy, but more like a warm, spicy flavor at Christmas. Spicy. You know, so it's basically just got a more complex character. The caramel notes mix with the more spicy notes to just create this flavor profile that has similar characteristics to cola, but it's very different at the same time.
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--:-- Amy McCarthy: And this pepper drink is now doing better than Pepsi. Was there something that happened in the past few years that really propelled Dr. Pepper to second place? I mean, there's a few things. One is Dr. Pepper has really done a great job of marketing itself as this differentiated product and really taking advantage of flavor trends in the U.S. over the last 20 years.
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--:-- Amy McCarthy: I mean, we've obviously got a huge demographic shift. You've got a huge multicultural consumer set out there that gravitates towards flavored carbonated soft drinks. So that's one trend that they've taken advantage of. They also have been able to not only get onto Coke and Pepsi trucks, which enables them to access the entire country on pretty powerful distribution systems,
--:-- Amy McCarthy: But they've also been able to get on fountains across the country so they can be served, as we talked about, in Coke restaurants, quote-unquote, and Pepsi restaurants, which gives it a much wider availability. So that's been a benefit as well.
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--:-- Amy McCarthy: And you've also had a 30-year period where PepsiCo, ever since it bought Gatorade back in 2000, has really been focused on its non-carbonated portfolio. They've seen things like sports drinks and teas and ready-to-drink coffees, canned coffees, as the drinks of the future.
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--:-- Amy McCarthy: And they've spent a lot of their investment dollars and attention on those kinds of products in their portfolio. And they haven't necessarily spent the same time and effort on brand Pepsi or Pepsi Cola as they might have in the past during the heyday of the Cola Wars.
--:-- Sean Rameswaram: So that's allowed Dr. Pepper to make up some ground there as well. Now, to be clear, Pepsi trademark, so that's everything from Pepsi Zero Sugar to regular Pepsi to diet Pepsi, is still the number two carbonated soft drink trademark in the country. Dr. Pepper is not number two in that regard.
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--:-- Amy McCarthy: Do you think Pepsi could return, could reclaim the number two spot? I mean, I think it's a great question. I mean, it's in essence at parity right now in our numbers, and this is based on volume. I would doubt PepsiCo is content having its flagship product be number three behind Dr. Pepper.
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--:-- Amy McCarthy: I would expect them to want to do something about that. but you know in the modern soft drink age the fact is the that brand pepsi is a smaller part of the overall pepsico company which half of which is frito-lay is a big snacks company it's less important than dr pepper is to keurig dr pepper which also has a massive at-home coffee business.
--:-- Sean Rameswaram: So, I'm Amy McCarthy, a reporter at Eater.com. And we're not here, Amy, to talk to you so much about Dr. Pepper, but I hear you're a fan of the doc. I am, in fact, a fan. I probably consume more Dr. Pepper than any medical professional would be comfortable with. it's maybe a problem.
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--:-- Amy McCarthy: How does the Dr. Pepper ascendancy fit into the larger story of what's going on in the beverage market in America and around the world right now? I think the beverage market is very weird right now, and there's a lot going on.
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--:-- Amy McCarthy: Now, the global non-alcoholic beer market is currently worth $20 billion, a figure that's expected to double to $40 billion by 2033. The prebiotic soda market closed 2022 with a gross revenue of $73.4 million.
--:-- Amy McCarthy: How could a new product break into the crowded bottled water market, which is valued between $146 and $350 billion? I'll focus kind of on two different phenomenons. The first is totally separate from Dr. Pepper. It's what the companies would call functional beverages or what you might call a healthy soda.
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--:-- Amy McCarthy: So a soda like Poppy or Olipop. So those have become really popular over the last, let's say, three to five years. I'll say I'm pretty skeptical on the health benefits of a soda, especially one that, in my opinion, doesn't taste very good.
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--:-- Amy McCarthy: But, you know, I understand why people are into them. The idea that you could get eight grams of fiber from a can of soda is both terrifying and appealing, you know, I guess. I guess so.
--:-- Amy McCarthy: You have that side of it where fewer people are drinking. We know that Gen Z is drinking less than generations that came before it. And they're looking for something to consume when they're at a party. So you have things like CBD seltzers, THC, cannabis seltzers. You have adaptogenic beverages.
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--:-- Amy McCarthy: So beverages that are infused with different types of mushrooms that promise some health benefits that are, you know, to be determined, I think. And so there's that side. There's the healthy, you know, soda that's better for you side.
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--:-- Amy McCarthy: And then the other side is like the polar opposite, where you have the most unhinged kind of flavor combinations that you can imagine. You have brands like Dr. Pepper and Coke and Pepsi making all these crazy flavors. Coke produced a space flavored beverage. Space? A taste from another world. Coca-Cola Starlight.
--:-- Amy McCarthy: What does space taste like? It's supposed to taste like space. You learn something every day. And then Dr. Pepper has kind of always been ahead of the curve on that. I was doing a little bit of research, and the first flavor variant that Dr. Pepper released was way back in 2002.
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--:-- Amy McCarthy: They released Dr. Pepper Red, I believe it was called, and it was like a cherry soda that was red in color. Oh, like Mountain Dew Code Red. Remember that guy? Yes, very similar, I would say, except a cola instead of a citrus soda.
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--:-- Amy McCarthy: So Dr. Pepper, I would say, was kind of at the forefront of the crazy flavor trend. Then in 2004 came cherry vanilla Dr. Pepper. There has been a cream soda Dr. Pepper. There has been a strawberries and cream Dr. Pepper. There's been a lot of different flavors.
--:-- Amy McCarthy: And so Dr. Pepper has been experimenting, and that's indicative of the broader soda world also getting a little strange? Totally. Mountain Dew is a really great example of that. There are so many wild flavors. There's been a spicy Mountain Dew. Spicy. Dragon fruit, you know, all these sort of different flavors that you don't typically associate with a soda.
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--:-- Amy McCarthy: Mountain Dew Summer Freeze. Oh, my goodness. This is a Dew with a blast of summer Americana. All right. There was a Oreo flavored Coke Zero and also Coke flavored Oreos. So the market was pretty limited. And now I think it's way more expansive, way more inclusive in terms of what types of flavors are popular.
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--:-- Amy McCarthy: It's not just a citrus soda, a cola and, you know, a Fanta. Is there like an actual market for Oreo flavored Coca-Cola in people's day to day lives? Or is this like a one time gimmick kind of thing?
--:-- Amy McCarthy: I think it's definitely the latter. I read somewhere where a sort of marketing expert was talking about the purpose of these kinds of products, and he described it as a yes and or a plus one kind of thing where you're walking down the soda aisle because you already buy Diet Coke or Coke Zero in this case, and you see this weird thing, this Oreo-flavored Coke, and you think, huh, I maybe want to try that.
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--:-- Amy McCarthy: I stopped in the gas station to get some quick carbohydrates for my workout, and I found this abomination. It's the most impulsive purchase I ever made, but I have to try it. Oreo Coke Zero. And because soda is so inexpensive, you know, you're maybe only buying a six-pack for $5 or an individual 20-ounce bottle for a couple bucks.
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--:-- Amy McCarthy: It such a low like way to experiment and try new things as opposed to you know a very expensive handbag or some trend that you saw on social media And so I think that really gets at what it is is that it just appeals to our sense of novelty And our, and I know for myself, whenever I see something weird on the grocery store, on the shelf at the grocery store, I'm gonna pick it up.
--:-- Amy McCarthy: I know that about myself to be like, this is so strange. And yet, I, you know, it doesn't mean I'm gonna buy it again. But maybe I will. Maybe you find something you really are in love with in that process of, you know, discovery and trying new things.
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--:-- Amy McCarthy: OK, but there is one place in these United States where the flavored weird soda situation is very real. And that is in the state of Utah. Correct. Correct. For anyone who watched the smash hit Hulu series, The Secret Lives of Mormon Wives, that was kind of a plot point.
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--:-- Amy McCarthy: In the Mormon church, drinking alcohol is not allowed. But even though Mormons don't drink, we like to party. So soda is the Mormon version of coffee, because we're not supposed to have coffee or tea, so then Mormons have tons of soda.
--:-- Amy McCarthy: Amazing. People who follow the rules to the T aren't allowed to drink hot drinks. So no coffee, no tea. But soda is fair game. And, you know, in Utah, there are chains, you know, like we have Starbucks and Dunkin and, you know, all the other independent coffee shops. the version of that in Utah is soda shops.
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--:-- Amy McCarthy: And those soda shops have started to expand beyond Utah. I live in Dallas, Texas, and we got our first locations of Swig, which is a Utah-based chain, last year. And I, like, rounded up my best friend. We got in the car and went and tried all these crazy drinks that involve, you know, a base that's a soda or a sparkling water, typically, and then there's syrups and all kinds of flavors, like just a dizzying array of flavors that you can add to these sodas.
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--:-- Amy McCarthy: 44-ounce sparkling water with sugar-free coconut, sugar-free vanilla, sugar-free raspberry, sugar-free pineapple, and coconut cream. Chef's kiss. All right, we're going to make a Mormon soda. We got our Diet Coke and our creamer. Let's do it. We're going to mix it all together. This looks so good. This is our treat. My mouth is watering already.
--:-- Amy McCarthy: Oh, same. Shake that up. Yeah, give it a good shake. And yeah, it's been really popular, I would say, especially with young people. You know, the idea of going and getting, you know, your special treat drink has been a thing for a long time.
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--:-- Amy McCarthy: And for people who aren't into coffee, for whatever reason, these have kind of filled that gap. It's funny to think of like all this experimentation going on right now in the beverage market because, you know, we're here because of Dr. Pepper, which began as a small local experiment in 1885, I believe.
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--:-- Amy McCarthy: So like, do you think we're right now maybe sampling the next Dr. Pepper? I think it's entirely possible. You know, I think that some of these upstart brands, there are so many right now. We'll see in maybe three to five years which ones have the staying power, if it's going to be Olipop, if it's going to be Poppy, if it's going to be both of them.
--:-- Sean Rameswaram: Today Explained is a production of Vox. Our team includes Avishai Artsy, Zach Mack, Eliza Dennis, Halima Shah, Amanda Lou Ellen, Miles Bryan, Victoria Chamberlain, Peter Balanon, Rosen and Rob Byers. Matthew Collette is a supervising editor. Miranda Kennedy is our executive producer.
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--:-- Sean Rameswaram: And Noelle King is our Dr. Pepper. Hadi Mawajdeh produced our program today. Amina Alsadi edited. Laura Bullard fact-checked. and we were mixed by Patrick Boyd and Andrea Kristinsdottir, whose name we're always getting questions and comments about.
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--:-- Sean Rameswaram: So basically, when we make last names in Iceland, you take your parents' first name and add son or daughter to it. Hence, Kristinsdottir. That was Icelandic last names explained. Bless, bless! Thank you.
