(New York) — North American unit case volume fell 1% in 2025, while sparkling soft drinks still account for 69% of global volume, with Trademark Coca-Cola alone at 47% — this concentration is both an advantage and a risk. The global functional beverage market is projected to grow from $151.8 billion in 2026 to nearly $240 billion by 2031, with prebiotic soda among the fastest-growing sub-segments. When the structural decline of traditional soda has persisted for two decades, Coca-Cola’s choice is not to defend the old category, but to redefine itself with new categories.
The Nature of the Problem: Consumers No Longer Believe in Soda
The traditional soda market is worth approximately $40 billion. But the real problem is the loss of trust. Sugar became the villain, and artificial sweeteners followed. The industry responded with reformulations, smaller cans, and zero-calorie versions, but none reversed the structural decline. Consumers didn’t just reduce intake — they began to actively distrust the category itself.
The 2025 full-year performance showed Coca-Cola’s global unit case volume posting zero growth for the first time in 10 years, with full-year revenue of $47.941 billion, a slight increase of 2% driven mainly by price increases rather than volume. Coca-Cola Zero Sugar, by contrast, posted 13% global volume growth in Q4. Clearly, people don’t dislike cola — they no longer want the sugar inside it.
Pepsi Moves First, Coke Responds
Pepsi acquired prebiotic soda brand Poppi for $1.95 billion, then launched its own prebiotic soda — its first major cola innovation in about 20 years. Coca-Cola’s response was Simply Pop, a fruit-flavored prebiotic soda built on one of its most trusted sub-brands. OLIPOP alone has surpassed $400 million in revenue and claims it is “still in the early stages of market penetration.”
Simply Pop contains 6 grams of prebiotic fiber, vitamin C, and zinc, is made with 25-30% real fruit juice concentrate, and is sweetened with monk fruit extract rather than stevia or artificial sweeteners. It launched regionally in the Western and Southeastern United States in February 2025, with national online availability through Amazon.
These are not experimental attempts. They are strategic commitments backed by serious capital.
Consumers Have Already Arrived First
What makes this moment different from previous health-positioned beverage attempts is that consumers come with awareness. Gut health is no longer a niche wellness term — it’s mainstream. Prebiotic claims in new beverage launches have grown more than 400% since 2021. Consumers recognize prebiotics, adaptogens, and nootropics just as the previous generation recognized vitamins.
GLP-1 drugs are adding another layer of influence. As more consumers manage appetite and eating patterns through medication, the profile of what they want to drink is changing: lower sugar, higher function, smaller volume but greater purpose. The functional beverage category is positioned to capture all these shifts simultaneously. Coca-Cola CEO James Quincey has highlighted the growing demand for protein products, noting that Fairlife protein products emerged as one of the fastest-growing brands in the U.S. last year.
Three Strategic Tracks
Coca-Cola’s response runs on three tracks.
Track One: Hardware that eliminates labor steps. A handcrafted “dirty soda” requires cream, syrup pumps, and cleanup, while a dirty soda made with a dairy module requires just a button press. The same applies to mixology stations pouring refreshers and iced coffee. What Coca-Cola sells to operators is the “handcrafted feel” without the handcraft.
Track Two: Category definition power. Starbucks invented the refresher in 2012 to fill the afternoon lull, and it now carries approximately $2 billion in annual sales. Refreshers appear on 8.1% of national chain menus. Coca-Cola North America’s Director of Dispensed Innovation, Sarah Kate Sims, admits there is currently no accepted definition of a refresher, and Coca-Cola wants to set one: a lighter, uplifting drink built on green tea or natural coffee extract rather than a coffee base, and visually appealing in the cup.
Track Three: White-label products. Coca-Cola worked with Whataburger for about 18 months on the Whatafreshers line, which entered the permanent menu on July 1, 2025. Coca-Cola calls itself a pioneer of premium lemonade, with its white-label lemonade flowing through more than 40,000 bubbler dispensers including Wendy’s. The energy drink launching in 2027 takes the same idea further: shipping with no color and almost no flavor.
The Fountain Channel: The Only Place Coca-Cola “Owns the Customer”
Why does all this happen in restaurants rather than supermarkets? Because in all other channels, bottlers stand between Coca-Cola and the customer. But in the U.S. fountain channel, Coca-Cola manufactures its own syrups, selling to fountain retailers or authorized wholesalers.
Fountain is the only channel where Coca-Cola makes the product, places the equipment, signs the account, and reads the data. Concentrate operations contributed 59% of 2025 revenue of $47.9 billion, with a gross margin of 61.6%, and fountain is the slice of that business where nobody else touches the customer.
This explains the existence of the labs. It also explains why Coca-Cola is willing to trade its own name for this position.
The McDonald’s Signal
Restaurant operators have discovered that beverages are the highest-margin, best-differentiation category on the menu. McDonald’s CEO Chris Kempczinski told analysts in early August that U.S. drink sales are running ahead of plan, with higher checks and new occasions appearing throughout the day.
Once an operator wants a signature drink, a branded Coca-Cola product becomes a problem rather than a solution, because a signature drink cannot carry a supplier’s logo. Whataburger didn’t want a Coca-Cola refresher — it wanted a Whatafresher.
Watch what happened with McDonald’s. It was Coca-Cola’s flagship customer for 70 years. In May 2026, it added refreshers and crafted sodas using Sprite and Hi-C. On August 11, it announced the Red Bull Dragonberry Energizer — its first energy drink. Coca-Cola acquired 16.7% of Monster Beverage in 2015 for $2.15 billion net cash, and today holds close to one-fifth, plus board seats and a distribution agreement. But when choosing an energy partner, McDonald’s chose the one Coca-Cola has no stake in.
Broader Portfolio Transformation
Coca-Cola is transforming from a traditional soda company into a broader “total beverage” player. In Q1 2026, sparkling soft drinks still achieved 2% volume growth, but the company increasingly relies on faster-growing categories including water, sports drinks, coffee, and tea, which together grew 5% in the quarter. Coca-Cola Zero Sugar grew 13%, tea grew 8%, and sports drinks grew 3%. But juice, value-added dairy, and plant-based beverages declined 3% — diversification itself does not guarantee consistent growth.
Coca-Cola HBC — the largest Coca-Cola bottler in Europe and emerging markets — is discussing entering the protein beverage category with The Coca-Cola Company. CEO Zoran Bogdanovic stated: “Protein products are at the core of our discussions with The Coca-Cola Company, and one of the categories we are examining.”
The company is also investing up to $650 million to expand production at its Fairlife facility in Michigan, adding 245,000 square feet of production space, with two additional production lines expected to be operational in 2028. Coca-Cola President and CFO John Murphy said the company plans to invest in other Fairlife facilities over the next three to five years to increase production capacity by 30%.
The Africa Bet
Coca-Cola HBC’s acquisition of 75% of Coca-Cola Beverages Africa (CCBA) is its largest transaction in history, expected to close in the second half of 2026. The acquisition price is $2.6 billion, corresponding to an implied equity value of $3.4 billion, covering more than 50% of the continent’s population and more than 60% of its GDP. CCBA operates in 14 Southern and East African territories, serving more than 800,000 customer outlets.
This is the Coca-Cola system’s geographic rebalancing in response to soda decline in developed markets: using volume growth from high-growth emerging markets to offset structural decline in mature markets. South Africa’s Competition Commission has recommended approval of the transaction, with conditions including a moratorium on job cuts in South Africa.
Bottom Line: Purpose, Not Ingredients
The functional beverage opportunity is not just a product story. It’s a positioning story. Innova Market Insights lists “beverages with purpose” as a top trend for 2026. The winning brands will be those that credibly own a specific benefit, not those that stack the most claims on the label.
Poppi built its audience through social-first marketing, influencer authenticity, and a visual identity completely different from health beverages. It feels fun. That’s why Pepsi spent nearly $2 billion — not to buy a recipe, but to buy a relationship with consumers who have stopped trusting traditional soda brands.
When the two largest marketing organizations on Earth simultaneously pivot to the same emerging category, it’s not a trend. It’s a reckoning. Functional beverages are where the next decade of soft drink innovation, brand equity, and consumer loyalty will be built. The gut has become the new frontier.
