While it appears that big soda executives have downgraded expectations that an all-natural, zero-calorie sweetener will be the “holy grail” that resuscitates the slumping CSD category, they continue to innovate with natural sweeteners and pump resources into new mid-calorie beverages — despite the products’ streaky sales record.
In a quarterly earnings call, Dr Pepper Snapple (DPS) announced that it is planning to test market 60-calorie versions of its Dr Pepper, 7UP and Canada Dry soft drinks. While DPS executives offered few details about the new sodas, the products will be formulated with a mix of sugar and stevia and contain no artificial sweeteners.
The news comes on the heels of DPS’ fourth-quarter earnings report, which noted that sales of its “Core 4” brands, which include its TEN platform of 10-calorie drinks, declined by 4 percent. While DPS executives have repeated stated that company remains firmly committed to its TEN line, the products, continue to face a steady deterioration in sales — much like the diet CSD segment as a whole — as consumers increasingly shun artificially sweeteners, and, in particular, aspartame.
In a note on the earnings report, Wells Fargo Securities analyst Bonnie Herzog said that the investment firm remains “somewhat concerned about this platform in today’s market, particularly given the pressure on low-calorie CSDs.”
Despite sustained concern about its ten-calorie drinks, Herzog sees DPS’ foray into mid-calorie sodas as “a good litmus test of whether an ‘all-natural’ product does in fact resonate with consumers.”
“Should this ultimately be launched more broadly, we believe the industry could see meaningful new products from all major manufacturers come to market soon, which could have a positive impact on CSD volumes in the U.S.,” Herzog wrote.
The decision by DPS to launch a new mid-calorie line follows the introduction of similarly-positioned products from PepsiCo and The Coca-Cola Co. Two years ago, PepsiCo introduced a national roll-out of Pepsi NEXT, a 60-calorie cola made with a natural and artificial sweetener mix, while Coke tested of a 70-calorie “Select” line for its Sprite and Fanta brands in select U.S. markets. Last year, Coke launched a stevia-sweetened cola called Coke Life, which the company is testing in Argentina. Both Coke and Pepsi have rolled out mid-calorie beverages in the past, yet the products, which include Coke’s C2 and Pepsi Edge, failed to gain traction with consumers and were quickly discontinued.