Despite move to a different sweetener, brand's declining sales
pressure drink maker
By Mike Esterl
PepsiCo Inc. may be on the verge of another big move to bail out
Diet Pepsi.
Last August, the snack and soft drink giant introduced
aspartame-free Diet Pepsi, removing one artificial sweetener and
substituting another, sucralose, in an attempt to stanch sliding
sales.
PepsiCo could announce more changes as early as this week.
Executives notified some bottlers in recent days that they plan to
discuss with them on Thursday an action plan to stabilize diet
cola, according to a person familiar with the matter.
PepsiCo didn't immediately comment Wednesday.
Since PepsiCo tried to fix the brand last August, Diet Pepsi's
plight has gotten worse. U.S. sales fell 12% in the 12 weeks ended
May 21, compared with 6.7% for all diet sodas, according to
estimates by Wells Fargo Securities, based on Nielsen store-scanner
data.
In the year before the debut of aspartame-free Diet Pepsi, sales
had fallen 8.5%, according to the estimates. In the past 52 weeks,
they've fallen 9.3%.
Diet soda sales industrywide declined a more modest 5.4% in the
most recent 52-week period, as rival Coca-Cola Co. and Dr Pepper
Snapple Group Inc. brands won market share. Diet Pepsi is still the
No. 2-selling diet soda after Diet Coke.
At the time, PepsiCo said it changed Diet Pepsi's recipe because
consumer surveys showed aspartame -- long the soda industry's
primary zero-calorie sweetener -- was the No. 1 reason Americans
were dropping diet cola. Although the U.S. Food and Drug
Administration vouches for aspartame's safety, some studies have
flagged health concerns and internet reports tie the controversial
sweetener to everything from cancer to autism.
But many Diet Pepsi loyalists don't like how the new,
sucralose-sweetened version tastes. And new Diet Pepsi drinkers
haven't materialized because Americans increasingly are rejecting
all artificial sweeteners, not just aspartame, over health
concerns.
PepsiCo defended its new recipe for Diet Pepsi, which also
includes another zero-calorie sweetener, acesulfame potassium,
commonly known as Ace K.
"Diet cola consumers in the U.S. asked for a great-tasting cola
without aspartame, and we delivered," the company told The Wall
Street Journal in a written statement last week, responding to a
request for comment.
At the same time, the company reiterated last week that it was
exploring ways to make the aspartame version available to
consumers. Chief Executive Indra Nooyi suggested last year that the
old version would be sold online.
Dean Crutchfield, an independent brand consultant, said PepsiCo
should make a mea culpa and bring back the old Diet Pepsi -- much
like Coke did in 1985 when it rolled out New Coke but quickly
reversed itself after longtime fans rebelled.
"The last thing you want to do is alienate your existing
customers because they're your ambassadors," said Mr. Crutchfield,
who has advised PepsiCo and Coke in the past.
Chase Thomas, a 42-year-old nurse practitioner, used to treat
himself to a Diet Pepsi every afternoon but stopped because the new
version tastes "awful" and "flat." He also doesn't like Diet Coke
or Coca-Cola Zero, instead keeping an unopened bottle of
aspartame-sweetened Diet Pepsi in his fridge as a keepsake.
"It's my Holy Grail," said Mr. Thomas, who lives in Anniston,
Ala.
Veteran beverage-industry consultant Tom Pirko said PepsiCo
would have to take more dramatic steps, including possibly changing
the brand name, to reverse plunging sales as consumers also are
turning their backs on all carbonated beverages labeled "diet."
Diet Pepsi's "now aspartame free" label hasn't attracted enough
new drinkers. While 42% of Americans avoided aspartame in a March
survey by the International Food Information Council Foundation,
35% avoided sucralose, up from 25% last year. Those who avoided Ace
K jumped to 28% from 13%.
Not helping matters, the consumer group Center for Science in
the Public Interest cut its sucralose rating to "avoid" from
"caution" in February after an Italian study linked the additive to
leukemia in mice. That followed a 2014 study by different
researchers suggesting the zero-calorie sweeteners saccharin,
sucralose and aspartame raised blood glucose levels, a risk factor
for diabetes.
Coke is far more exposed to soda than PepsiCo, which derives
more of its sales from noncarbonated drinks and snacks. Still, Diet
Coke's U.S. sales fell just 4.7% in the 52 weeks ended May 21, half
as much as Diet Pepsi, according to Wells Fargo.
Negative tweets about Diet Pepsi outnumbered positive ones by a
two-to-one ratio between October and May, according to social media
tracker Sysomos. Tweets mentioning Diet Coke were slightly positive
over the same period.
Write to Mike Esterl at mike.esterl@wsj.com
(END) Dow Jones Newswires
June 09, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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