PepsiCo Plans to Revamp Its Diet Sodas, but Will It Help?
Highlights of PepsiCo's 1Q15 Results: Top Line Disappoints (Part 5 of 5)
Diet sodas
In April 2015, PepsiCo (PEP) announced that it will replace aspartame in its diet soda products with a mixture of artificial sweeteners, acesulfame potassium, and sucralose. In August this year, PepsiCo will bring in Diet Pepsi, Wild Cherry Diet Pepsi, and Caffeine Free Diet Pepsi with a blend of these new sweeteners. The company is making this move in response to the continued decline in diet sodas.
Diet sodas lost their fizz
According to Beverage Digest, the decline in diet soda volumes has been more significant in recent years—compared to the traditional or full calorie sodas. In 2014, Coca-Cola’s (KO) volumes were up 0.1%. In contrast, Diet Coke’s volumes declined by 6.6%. PepsiCo’s brand volumes declined by 1.8%, while Diet Pepsi’s volumes declined by 5.2%—compared to 2013. Also, Diet Dr Pepper (DPS) witnessed a 7.9% decline in its 2014 volume. It isn’t featured in Beverage Digest’s top ten brands.
Consumers moved away from diet sodas due to health concerns regarding the artificial sweeteners in the drinks. Aspartame has been associated with headaches, dizziness, and other critical health issues like Alzheimer’s, birth defects, diabetes, and even cancer. However, the FDA (Food and Drug Association) maintains that aspartame is safe for consumption by the general population.
Although soda giants deny the ill-effects of aspartame, they have been working to develop other artificial sweeteners as well as natural sweeteners. Recently, both Coca-Cola and PepsiCo came up with drinks containing a natural sweetener—Stevia.
PepsiCo has been investing heavily in product innovation in both the beverage and food categories. Recently, the company introduced new Naked Juice flavors, Tropicana Farmstand Tropical Green, and Mountain Dew DEWshine. PepsiCo accounts for about 0.4% and 0.8% of the portfolio holdings of the iShares MSCI ACWI ETF (ACWI) and the SPDR S&P 500 ETF (SPY).
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