Makers of Sodas Try a New Pitch: They’re Healthy (original) (raw)

March 7, 2007

Healthy soda?

That may strike some as an oxymoron. But for Coca-Cola and PepsiCo, it’s a marketing opportunity.

In coming months, both companies will introduce new carbonated drinks that are fortified with vitamins and minerals: Diet Coke Plus and Tava, which is PepsiCo’s new offering.

They will be promoted as “sparkling beverages.” The companies are not calling them soft drinks because people are turning away from traditional soda, which has been hurt in part by publicity about its link to obesity.

While the soda business remains a $68 billion industry in the United States, consumers are increasingly reaching for bottled water, sparkling juices and green tea drinks. In 2005, the amount of soda sold in this country dropped for the first time in recent history. Even the diet soda business has slowed.

Coca-Cola’s chief executive, E. Neville Isdell, clearly frustrated that his industry has been singled out in the obesity debate, insisted at a recent conference that his diet products should be included in the health and wellness category because, with few or no calories, they are a logical answer to expanding waistlines.

“Diet and light brands are actually health and wellness brands,” Mr. Isdell said. He asserted that Diet Coke Plus was a way to broaden the category to attract new consumers.

Tom Pirko, president of Bevmark, a food and beverage consulting firm, said it was “a joke” to market artificially sweetened soft drinks as healthy, even if they were fortified with vitamins and minerals. Research by his firm and others shows that consumers think of diet soft drinks as “the antithesis of healthy,” he said.

These consumers “comment on putting something synthetic and not natural into their bodies when they consume diet colas,” Mr. Pirko said. “And in the midst of a health and welfare boom, that ain’t good.”

The idea of healthy soda is not entirely new. In 2004, Cadbury Schweppes caused a stir when it unveiled 7Up Plus, a low-calorie soda fortified with vitamins and minerals.

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Coca-Cola is scheduled to release Diet Coke Plus, while PepsiCo will bring out a similar beverage, Tava.

Last year, Cadbury tried to extend the healthy halo over its regular 7Up brand by labeling it “100 percent natural.” But the company changed the label to “100 percent natural flavor” after complaints from a nutrition group that a product containing high-fructose corn syrup should not be considered natural, and 7Up Plus has floundered.

The new fortified soft drinks earned grudging approval from Michael F. Jacobson, executive director of the Center for Science in the Public Interest, a nutrition advocacy group and frequent critic of regular soft drinks, which it has labeled “liquid candy.”

“These beverages are certainly a lot better than a regular soft drink,” he said. But he was quick to add that consumers were better off getting their nutrients from natural foods, rather than fortified soft drinks.

A survey by Morgan Stanley found that only 10 percent of consumers interviewed in 2006 considered diet colas a healthy choice, compared with 14 percent in 2003. Furthermore, 30 percent of the consumers who were interviewed last year said that they were reluctant to drink beverages with artificial sweeteners, up from 21 percent in 2004.

Even so, several industry analysts said soft drink makers were smart to experiment with new types of carbonated diet soft drinks to stimulate sales. Besides the vitamin-fortified diet sodas, PepsiCo is introducing Diet Pepsi Max, with increased caffeine and ginseng, and Coca-Cola has started a new marketing campaign for Coke Zero, emphasizing how closely it tastes to Coke Classic.

“Just to ignore it is not the answer,” said Lauren Torres, an analyst at HSBC. “You want to grow what you have going for you. That’s an effort that they have to make.”

John Sicher, publisher of Beverage Digest, an industry newsletter, said it made sense for soft drink companies to “tiptoe” toward health and wellness, given consumer interest in low-calorie drinks and so-called functional beverages, which are supposed to deliver some health benefit beyond any basic nutritional value, like orange juice with added calcium.

Fortified sodas like the new Coke and Pepsi drinks will most likely remain a niche, Mr. Sicher said. But he predicted sales of diet soft drinks over all will increase in coming years with improved marketing, better taste and new products.

He noted that Diet Dr Pepper, made by Cadbury Schweppes, has grown quickly with a simple but effective marketing campaign that says it tastes like regular Dr Pepper, but without the calories.

“Consumers like a product with good taste and no calories,” he said. Diet sodas “will begin rebounding with all the diet innovation we are seeing and more marketing focus on diets.”

The number of cases of soft drinks sold continued to slide last year after its 2005 drop, said Mr. Sicher, who monitors industry sales data.

Over all, diet soda accounted for 29.6 percent of carbonated soft drink sales in 2005, up from 24.7 percent in 2000, Mr. Sicher said.

The efforts to turn around diet soda — and soft drinks in general — are particularly important for Coca-Cola, since, along with energy drinks, they account for 81 percent of the company’s revenue worldwide. By contrast, Pepsi has diversified more into other food and beverage lines, including Frito-Lay, Quaker Oats and Gatorade. Soft drinks account for 31 percent of revenue for PepsiCo beverages in North America; Pepsi-Cola, however, remains by far the company’s largest brand worldwide.

Diet Coke Plus will be introduced this spring, and will cost the same as regular Diet Coke. Tava will be available to consumers this fall; PepsiCo officials say they have not determined the price.

In discussing the sluggishness in diet soda sales, Dawn Hudson, president and chief executive of Pepsi-Cola North America, noted that over the last decade, consumers grew tired of drinking nothing but colas like Coke and Pepsi and sought other beverages. She said the diet category was more “cola-centric” and provided fewer alternatives than regular soda.

But recently, she said, noncola diet drinks like Diet Mountain Dew and Sierra Mist Free have done well.

Tava, the new drink, will be lightly carbonated and offer exotic flavors, she said. It will contain vitamins B3, B6 and E, and chromium.

“Lower-calorie beverages are clearly the growth area,” she said.

Katie Bayne, senior vice president for Coca-Cola Brands at Coca-Cola North America, said lackluster marketing and lack of innovation hurt the diet category. But she too predicted that new products and clever marketing would reinvigorate diet sales.

“In today’s world, it’s not about what we choose to sell, but what consumers want,” Ms. Bayne said. Diet Coke Plus — which will contain niacin, vitamins B6 and B12, magnesium and zinc — “is right for a certain group of consumers,” she said.

While it is too soon to know whether consumers will buy the idea of a vitamin-fortified diet soda, soft drink companies are trying to find other ways to reposition their products as healthy. For instance, all of the major soft drink companies are furiously trying to develop a no-calorie natural sweetener to allay concerns about artificial sweeteners.

“I think it is the holy grail,” said Ms. Hudson of Pepsi-Cola. “But it has to taste great.”

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