KANSAS CITY – It seems soft drink giants can’t win with consumers.
Not long ago, full-sugar colas fell out of favor with the health-conscious set, said Indra Nooyi, chairman and chief executive officer of PepsiCo, during an Oct. 16 call with analysts.
But more recently, she added, the diet segment is fizzling faster than expected.
“…especially in the last, I'd say, six to nine months, there has been an accelerated decline in diet drinks, as people say they don’t even want artificial sweeteners,” Ms. Nooyi said. “They want more natural sweeteners; they don’t mind some calories, but they want natural sweeteners. They want to go back to sugar in some cases, so we are seeing a fundamental shift in consumer habits and behaviors.
“We anticipated some of these. The diet slowdown has been a little more rapid than we expected.”
The sugar-free slide has hit the Coca Cola Co., too, which called the decline in diet drinks another “headwind” the company faces.
“Diet Coke is like a lot of diet products in the United States, and not just beverages but across the whole array of food, are under a bit of pressure as people are questioning ingredients, ingredient safety and so forth,” said Steve Cahillane, president of Coca-Cola Americas, during an Oct. 15 call with analysts.
While Coca-Cola said it is focusing on promotion and new packaging for its zero-calorie brands, PepsiCo is pouring its efforts into innovation.
“We are staying on the path of innovating along natural sweeteners, and thinking about flavoring agents to make sure sugar taste more sugary, so that’s all we’re focused on,” Ms. Nooyi said. “And our goal is to bring to the market a product that tastes great. We don’t want to rush a product to the market, and then have to wonder why we launched something that wasn’t that great-tasting. So that’s our focus.”
To meet the need for reduced-sugar soft drinks, PepsiCo launched its Pepsi Next platform last year. Similarly, the Dr Pepper Snapple Group Inc. has ramped up investment in its Dr Pepper TEN line of mid-calorie soft drinks, which the company called its “most strategically important innovation.”
Larry Young, president and chief executive officer of Dr Pepper Snapple Group, said during a July 24 earnings call that his company is “very concerned with the decline in diets.”“Our diets, you know, continue to perform below what we see in the category — not just ours; I’m talking about the entire category,” Mr. Young said. “And one of the main reasons that we went after being so aggressive with the TEN; people want better-for-you, but the diets are going down. Is that the sweeteners? What is it? That’s what we’re trying to find; but with the TEN, I think we’ve been able to answer part of that.”