Pecoriello: Pepsi Next? Next!

Aaron Dentel-Post|April 1, 2011 12:20 pm

Reports that Pepsi will be launching a new mid-calorie cola, Pepsi Next, has been met with skepticism by a leading beverage industry analyst.

In a research note filed by Bill Pecoriello of Consumer Edge Research LLC., the analyst cited decreased interest in colas, a failure of previous mid-calorie cola products and a consumer base that is more interested in natural sweeteners and better taste.

Pecoriello pointed out that based off the failure of the mid calorie colas Coke C2 and Pepsi Edge in 2004, one could predict the failure of Pepsi Next with a degree of certainty.

“Very simply, the name on the door (Pepsi) is losing share no matter how you cut the data,” says the Consumer Edge Research report. “The Pepsi [trademark] is losing share of colas, colas are losing share of CSDs and CSDs are losing share of beverages.”

While Pecoriello’s research indicates there is a significant portion of the marketplace interested in trying mid-calorie colas that taste similar to Pepsi Cola, that is exactly the hiccup: he believes that they won’t taste like Pepsi. According to Pecoriello, Pepsi has spoken of breakthrough innovation, but a mid-calorie cola with artificial sweeteners is remarkably similar to the 2004 Pepsi Edge product. It also means Pepsi is probably still a ways from developing a similar, naturally sweetened product that could turn cola’s slipping fortunes around, the report indicated.

Mr Potato Head

I disagree on one hand and agree on another. 2004′s Pepsi Edge and Coke’s C2 failed should not be interpreted as a definitive verdict on the concept of mid-calorie sodas. Notice I said sodas…..consumers clearly want options in the CSD category that are not zero calories, but at the same time not anywhere close to the typical offering, which is 100 calories/8oz.

Coke and Pepsi often launch products ahead of their time, Josta, energy sodas and cofffee beverages were all launched and killed years prior to the category breaking out. Even Coke Zero’s initial launch was a bust……they had to relaunch it before it took off.

What MOST consumers are saying is, sure we want a mid-calorie soda…..just not Coke and Pepsi….”It’s the Cola” is the problem. Notice my pun? The opening for Mid-Calorie is in other flavors of soda, probably fruit sodas, unique sodas, new flavors that have no point of reference.

Also, there were people that did very much like C2 and Pepsi Edge, they were in the minority. It is possible that the bar for success won’t be $1 billion in sales, but instead perhaps $200 million. Or even $100 million. Tell me how this is a failure?

LRB fragmentation is what has happened in the past 15 years……there is room for Pepsi Next.
Anonymous

I agree with Mr. Potato Head
Many things are relative.
For example;
We have a very successful mid calorie soda (50 per 8oz)
We have an EBITDA of 2 million per 10 million in sales, which is higher than most soda companies, but we do not have the scale to reach 100 million or 1 billion as a young company and using our own money.
What a large company or critics may think of as failure… say 20 million in sales, can make a lot of money for a debt free private company with a few employees.
It would be bad if a Coke or Pepsi only did that amount because they can reach those numbers by filling the channel, and then find out later it is still on the shelves.
The neat thing about doing it as a small company is that it is based on reorders, so you know you have a winner.
I would rather have a 2 million dollar EBITDA on a 10 million dollar company than to own a 500 million dollar company that loses money.
Gross sales are not what you keep. Earnings are.
The old joke is that
“I am losing a nickel per gallon, but will make it up with volume.”

We also avoided Colas as this is a large and interesting market, but one that is dominated by low pricing and market saturation.
Not to say it is not in our future plans to take a 20 million slice of that pie in the future; as the big guys would not notice it was missing, and we could find things to do with the revenues.
Peace out
Oleboss

I’ve been in the beverage business for over fifty years! Pepsi, Coke, Dr Pepper and others test the market periodically. Some good some bad. It will continue. No big deal. Public taste is fickle and so goes colas, flavors et al. Colas are not going away, regardless of what the do-gooders say. Stop testing the market – you’re in trouble!!
Richard Aust

I have to ask myself where the consumer demand is for half-diet colas? If I were the product manager for such a concept, I would want to see if self-service fast-food customers are blending half sugar with half diet. One could simply watch customers in a high volume Taco Bell and see if this is a consumer-driven dynamic. In a week you would know for sure., but I would be amazed if it is.

Richard A. Aust
LiquidPress Company
Business and Product Innovation
22866 Sailwind Way
Lake Forest, CA 92630-3676
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Phone: 949-472-6380
Cell: 949-573-3998
Email: richaust@liquidpress.biz

Successful people drive fast and take shortcuts.
Anonymous

Richard;
It is not that a mid calorie soda or even a zero calorie soda makes somebody buy a pop.
By itself, you are right it would be a loser. But if it tastes as good at 1/2 the level then many people will drink it. Why not?
If you see diet monster sales they are very good in comparison to most diet energy drinks.
Primarily; that is because it tastes the same as the regular version; so why not drink it instead?

Basically a brand needs to be a very good regular soda to make it as a mid soda.
Usually, by using high quality ingredients, you can use less sweetener to achieve the same results because you do not need to overcome the taste of poor ingredients.

We for example, have a mid cal soda that tastes better than full calorie sodas at half the level because we work with each ingredient so we do not have to mask the flavor with more sugar.
One example is we took a powder ingredient other brands use and liquified it before using it
because that reduced the bad taste of that ingredient which would need a sweetener to mask.

if you want to get data on what is done with juices/ bar mixes for example go to naturalbrands.com
We wrote it years ago and need to update this year, but it tells a lot about how mixologists create healthy drinks that taste better than the junk we love.

Peace out
Steven Weiss

April 5, 2011

The Pepsi-Cola Company

Pepsi-Cola should take birth control pills. Pepsi-Cola is giving birth to a product that is doomed to failure. According to Advertising Age Pepsi-Cola plans to launch a 60-calorie cola dubbed “Pepsi-Next”. It is the brand’s third try at such a product and fits in an ever-expanding portfolio of Pepsi sodas. I am wondering –why?

Pepsi-Cola has lost share to Diet Coke. Diet Coke is now the second largest selling soft drink in the U.S. Some of the reasons offered are: The Pepsi-Cola focus on healthy snacks, the dismal performance of the “Refresh” project and the exodus of marketing talent. These were certainly some of the reasons, however hubris is the lynchpin.

Pepsi-Cola thought the connections it made with consumers could never be broken. That they had what it takes to be indispensable. The consumers had the last word.

Pepsi-Cola went back to the drawing board and decided the best way to grow the cola market is to expand their line of beverages and to create excitement.

This is akin to General Motors introducing the Chevy Volt– A car that nobody wants and is doomed at the outset. It is also analogous to NBC who was going to revolutionize the television business by putting Jay Leno in prime time.

A 60-calorie cola has been a dismal failure. In the mid-1990’s Pepsi-Cola introduced the short-lived 70-calorie cola, Pepsi XL. In 2004, Pepsi introduced the 70-calorie cola Pepsi-Edge and in 2005 and 2007 they were buried in the Pepsi-Cola graveyard.

Why try again? Research “green lighted” it. There is a pent up demand for better tasting low calorie products, said Bill Pecoriello, CEO of Consumer Edge research. “Our research suggests that a mid-calorie cola could drive incremental volume for carbonated soft drinks.” Other research suggests that mid-calorie colas are expected to appeal to a demographic older than that of full calorie soft drinks.

Research gives the Pepsi-Cola management cover. Pepsi Cola looked at the research that supported their strategy.

The Pepsi-Cola Company was a brilliant marketing company in the late 90′s and early 2000′s. Chairman Nooyi was hailed as a forward-looking CEO.

The Coca-Cola Company has left them in their dust. It will be interesting to see if the Pepsi-Cola Company gets it. I do not think they will.

Steven Weiss
Disregard Previous Instructions
1.314.646.1499
Donna

I disagree with all the negative comments on Pepsi Next. As an avid cola drinker and diabetic I give all the mid-carb colas a try and I love Pepsi Next! Please Pepsi, don’t discontinue this drink. If people would just give it a try it’d be a best seller. I didn’t have to “get used to the taste” as I, and others, have and had to do with the diet drinks. Pepsi Next is my drink of choice now. Cudos to Pepsi Cola!!
devine529

Do not like the name, this is reason enough to not try it.
Sunance

how disappointing, I really believed when they said 60 percent less sugar I just assumed that would leave 40 percent of REAL SUGAR. Awful
DANNY AMBROSE

PEPSI NEXT IS HOLE LOT BETTER THEN REAL SODA’S
E. Reedy-Andres

I tried the Pepsi Next when I had a Kroger coupon. To my surprise, I found it delicious.
I no longer buy coke. I only buy Pepsi Next. I love it!

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Pecoriello: Pepsi Next? Next!

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