What to do about Diet: How Pepsi, Coca-Cola and Dr Pepper are tackling diet drink declines
As PepsiCo prepares to launch its reformulated aspartame-free Diet Pepsi next month, Coca-Cola and Dr Pepper have been questioned on their approach to diet drinks.
Executives admit the category is challenging, but remain upbeat about its future.
Coca-Cola anticipates Diet buzz
In its latest quarter, The Coca-Cola Company saw 1% growth for brand Coca-Cola and 6% growth in Coca-Cola Zero worldwide, but a 7% decline in Diet Coke. However, the company says it is upbeat about Diet’s future, thanks to a loyal consumer base.
“Diet Coke continues to struggle,” admitted Sandy Douglas, executive vice president and president, Coca-Cola North America, speaking in last week’s Q2 earnings call. “[However], we’re starting to see the consumer base stabilize.
“We have an incredible number of very loyal drinkers in Diet Coke, that love Diet Coke.
“And our milestone that we're seeking to achieve soon is to level our revenue. To match price and volume, such that Diet Coke's revenue gets to flat and then starts to grow again. As we look ahead, what I would tell you about Diet Coke is that we believe strongly in the Diet Coke franchise. Diet Coke, the brand, is the number one diet beverage in the United States, and it will be for a long time to come.”
Coca-Cola says the challenge for Diets is mainly relevant to the US, where it is watching PepsiCo’s move to ditch aspartame from Diet Pepsi.
“We also are looking at changes in the category,” continued Douglas. “Our largest competitor is changing their formula, and they'll be launching that in August, and that will create a lot of buzz in the category. Some of it good, as the good science of the safety of non-nutritive [low/no calorie] sweeteners gets out in the marketplace and is reinforced.
“We are looking at multiple programs, to not only strengthen Diet Coke but to offer consumers adjacent innovation in the Diet Coke franchise. And we're excited about the long-term future. But as we say, it's work in progress and a lot more work to do, but we still are very optimistic about the long term.”
Diet Dr Pepper’s marketing boost
Dr Pepper Snapple president and CEO Larry Young has been championing the Diet Dr Pepper decline as less drastic than the overall Diet category.
Its ‘Lil’ Sweet’ commercials, featuring American Idol (2002) runner-up Justin Guarini, have been dedicated to the beverage (you can watch one of the adverts here).
Dr Pepper Snapple saw Diet decline 3% in its latest quarter, and Young attributes the relatively gentle decline to its marketing efforts.
“Before, whenever we started going down, our media was basically Pepper, Diet Pepper and Pepper TEN together,” he said, speaking in last week’s earnings call.
“And we broke the set out with Lil' Sweet, that is Diet Dr. Pepper completely, so I'm going to give the majority of that turnaround to my marketing department and our media partners that were able to put that together for us.”
Young added that a reduced decline is “sustainable, very sustainable.”
Asked if he had thought about testing a diet product with a different sweetener, Young said he would be watching Diet Pepsi’s reformulation launch, but was satisfied with diet Dr Pepper’s current taste profile.
“Our customer, our consumers love it,” he said. “We have a lot of products out there – our Diet Rite is sweetened with Splenda, we have different sweeteners across the portfolio.
“But as far as our Core 4 [Canada Dry, 7UP, A&W, Sunkist] and our Dr Pepper, our base business, we’ll be watching everything, but we’re very pleased with where we’re at right now.”
PepsiCo sees ‘aspartame fall out of favor’
PepsiCo announced in April that it is reformulating Diet Pepsi to omit aspartame, replacing it with sucralose and acesulfame potassium. The new versions of Diet Pepsi, Caffeine Free Diet Pepsi, and Wild Cherry Diet Pepsi will hit US shelves in August.
Aspartame, although considered safe by all major scientific and regulatory bodies, still raises concerns with some activists and consumer groups over fears it may be carcinogenic.
Speaking in this month’s Q2 earnings call, chairman and CEO Indra Nooyi said Diet Pepsi is still ‘big business.’
“Aspartame fell out of favor with some consumers,” she said. “From our perspective, we just want to make sure we have an offering for all of the consumers who want to switch out of aspartame and we have formulated a very, very good product, which is aspartame-free and will be available in the market starting in late August.
“So I think this is a consumer-driven strategy to offer all of the diet lovers a diet cola that is aspartame free.”
The current formulation of PepsiCo (sweetened with aspartame) will still be available online, she added.
