In today’s Finshots, we tell you why Pepsi is losing its fizz in the American soda market and how Sprite and Dr Pepper bubbled their way to the top.

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The Story

Pepsi is no longer the third most popular soda in the US. Here’s what happened.

According to a poll conducted by Beverage Digest last year, Dr Pepper dethroned Pepsi from its second place spot among the top three sodas in the US.

A few days ago though, it was knocked out of the top three entirely — this time by Sprite. And here’s how the rankings look now: Coca-Cola at #1, Dr Pepper at #2, Sprite at #3 — which, by the way, is also owned by Coca-Cola and Pepsi at #4. While Coca-Cola’s 19.1% market share is more than double that of any of its rivals, Dr Pepper, Sprite and Pepsi are in a tight race with 8.3%, 8.03% and 7.97% respectively.

But hey, people have always loved Pepsi’s taste. In fact, back in the 1990s, Coca-Cola was so worried about Pepsi’s growing popularity that it briefly changed its own formula to taste more like Pepsi. It was called the New Coke.

So if people loved Pepsi so much, enough to intimidate even the top soda, how did Pepsi go from being a soda favourite to losing out to Dr Pepper and even Sprite?

First things first, soda preferences are changing. Americans are simply drinking less soda now. Between 2022 and 2023, the number of internet users who said they’d had a regular cola in the past three months dropped from 47% to 43%.

And there are a bunch of reasons for that.

For starters, prices have been rising partly because of higher operating and input costs thanks to inflation. That’s why, even though soda sales grew 10% in value terms, the actual sales volumes fell by 1.7%. And this might get worse with the new tariffs the US has slapped on imports from other countries. That’s bad news for Pepsi, which mainly relies on concentrate imports from Ireland. Coca-Cola, on the other hand, mostly sources its concentrate domestically from Atlanta, so it’s better protected. These extra costs might end up getting passed on to consumers, making Pepsi even more expensive on shelves.

On top of that, people are ditching fizzy drinks altogether. They’re reaching for energy drinks, kombuchas and “healthier” options instead. That hurts all soda brands, of course, not just Pepsi.

But here’s where it gets interesting. Even though total soda consumption is dipping, brands like Dr Pepper and Sprite are still gaining market share. So why is Pepsi slipping?

Well, Gen Z might have something to do with it.

Younger consumers today are bored of the usual classics. They want bold flavours, quirky brand names and drinks that feel new and exciting.

Dr Pepper fits that bill. It isn’t your regular cola but a blend of fruity, spicy and cola-like flavours, with hints of vanilla, cherry and cinnamon.

Sprite too has been experimenting beyond its lemon-lime roots. Take Sprite Chill, for instance. It started as a limited-edition cherry-lime flavour with a unique cooling effect minus the mint. And it was such a hit that it became a permanent product. In fact, it became Coca-Cola’s top-selling new soda in 2024, raking in $50 million in just 21 weeks.

Now, this shift in preference has hit Coca-Cola too. But Coke’s market share is just so massive that it can absorb the blow. Pepsi, on the other hand, didn’t have that cushion and was easier to knock down.

And then, there’s the bit about Pepsi sort of losing sight of its main game — cola. See, while everyone was getting more health conscious, Pepsi tried to ride that wave. Under Indra Nooyi’s leadership, it started shifting focus away from sugary sodas and moved towards healthier stuff — juices, kombucha, hummus... you name it. That’s how consumers got brands like Naked Juice, KeVita and even a tie-up with Sabra for hummus. At the same time, it doubled down on its snacks business — chips like Lay’s, Doritos and Cheetos. And that side of things really took off. In fact, snacks now make up 60% of PepsiCo’s revenue globally.

But in doing all that, Pepsi’s drinks business kind of got sidelined. It didn’t get the love, attention or aggressive marketing it once did. Gatorade, which used to dominate sports drinks, started slipping. And Pepsi cola, the flagship drink, quietly faded into the background. The numbers reflect that too. Since 2010, Pepsi’s carbonated soft drinks, including Diet Pepsi and Pepsi Zero Sugar, saw a 32% drop in sales volumes. That’s huge when compared to Coca-Cola’s 14% decline.

Even its ads started feeling all over the place. There was no strong messaging, no punchy campaigns and not nearly enough spend compared to Coke. For perspective, Pepsi spent about half of what Coca-Cola did on advertising in 2023 and fell even further behind in 2024. Sure, 2025 has shown some signs of a rebound, with small sales bumps for Pepsi Zero Sugar and Wild Cherry Pepsi, but the cola category is still struggling.

So, how can Pepsi claw its way back into the cola game before it fades into soda history?

Well, the first thing it needs to nail is advertising. And it has. Pepsi is tapping into its old-school playbook, bringing back the fiery spirit of the 1980s cola wars. This year, it relaunched the iconic Pepsi Challenge, setting Pepsi Zero Sugar head-to-head with Coca-Cola Zero Sugar. The pitch this time is that Pepsi tastes better with food, backed by its own flavour and fizz research.

It’s also doubling down on social media and even running “undercover agent” campaigns where Pepsi secretly replaces Coke in fast-food meals.

But let’s be honest, ads alone won’t save the day, especially if it’s looking to reverse years of underinvestment.

Pepsi also needs to stop playing it safe and start getting bold. To its credit, it’s trying. It pumped more ad money back into key beverage segments, launched Starry to take on Sprite, and even bought the trendy prebiotic soda brand Poppi for nearly $2 billion, which is a direct challenge to Coke’s Simply Pop. But again, this could turn into another distraction from its core cola business.

So what it might really need is innovation that sticks — like a reinvented Crystal Pepsi. Remember that clear version of Pepsi that looked like water but had a mild cola flavour? It was ahead of its time in the 1990s, but fizzled out because it didn’t taste enough like Pepsi cola. Maybe if Pepsi went back to the drawing board, figured out what worked (and what didn’t), and created something bold around its core cola it could win hearts and market share again.

Let’s just hope that someone at Pepsi is reading this.

Until then…

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