Could Pepsi NEXT success lift stevia from zero to (mid-calorie) hero?

02-Aug-2012 - Last updated on 03-Aug-2012 at 14:58 GMT

With an industry consensus forming that stevia can only offer a 50% calorie reduction in soft drinks, the US success of mid-calorie cola Pepsi NEXT could silence some of the sweetener’s critics, says one analyst.

Diana Cowland, health and wellness analyst at Euromonitor International wrote in a recent blog: “If the success of PepsiCo’s Pepsi Next – a mid-calorie drink – in the US is replicated in Europe, we are likely to see more reduced-calorie rather than zero-calorie soft drinks introduced.”

With disputes ongoing about the best sucrose/stevia balance needed to create the best taste profile, given liquorice-like aromas and a bitter after-taste, Cowland said growers such as Sweet Green Fields, and firms such as PepsiCo and Coca-Cola, had decided only a 50% calorie reduction was possible.

Sugar - the unhealthy macronutrient?

Cowland told BeverageDaily.com: "Sugar is, to some extent, now seen as the most unhealthy macronutrient. This is particularly advantageous to categories such as RTD tea and juice.

"But if stevia-sweetened products continue to gain interest amongst consumers and we witness more product launches, it is likely that further R&D will improve the taste profile of stevia, and therefore continue to reduce the calorie content of stevia-sweetened beverages."

After noting the 50% calorie reduction threshold, Cowland then referenced the success of Pepsi NEXT, which PepsiCo launched in the States on February 27. (From an editorial standpoint it’s worth noting that the jury is still out on the drink’s long-term prospects).

She said: “[T]he success of PepsiCo’s Pepsi NEXT in the US should ward off some critics. As Pepsi NEXT is sweetened with high fructose corn syrup, aspartame, sucralose and acesulfame K, no doubt manufacturers would see some success if they used stevia to replace this cocktail of high-intensity sweeteners.”

Dairy and RTD prospects

Coke was doing just that, Cowland said, gearing-up to debut stevia-sweetened versions of Sprite and Fanta in the US this summer with 50% fewer calories.

“It is likely that Coca-Cola will see stronger sales than those of its rival PepsiCo as the natural angle is sure to capture of more consumers,” she added.

Meanwhile, RTD green teas (absolute value growth of $1.3bn from 2006-2011 driven by a growing Asia-Pacific population and the Middle East) and dairy drinks flavored with fruit juice could offer new stevia opportunities, Cowland said.

“Perhaps the next step after soft drinks will be a crossover into flavored milk drinks, particularly those flavored with fruit juice, which are set to enjoy absolute value gains of $2.3bn globally over 2011-2016.”

She added: “As milk is regarded as a natural and healthy product, the addition of stevia could help to promote its health-related attributes by reducing the sugar content.”

Cowland also discussed stevia-based drinks launches since December 2008 (when it gained Food and Drug Administration food additive approval) and European Commission approval of the sweetener from December 2011.

Slow takeoff in EU?

Market moves had been “somewhat slow” to occur since stevia was permitted in the EU, Cowland said. For instance, in France, the only stevia drinks remained Coca-Cola’s Fanta Still, Nestea and Sprite.

Yet Cowland noted recent Nestea stevia launches in 2012, in the Czech Republic, Austria, Greece, Italy, Poland, Slovakia and Slovenia in July, and the Benelux countries and Germany in Q4.

Since 2008, when PepsiCo first started using stevia in US sports drink SoBe V, Cowland said the brand had steadily lost market share: off-trade sales fell from 431m liters in 2007 to 318m liters in 2011.

"Reformulation to include stevia, and therefore lower the calorie content, will not necessarily lead to a growth in sales or immediately change consumer’s opinions about a product. It is, however, important to consider that stevia will slightly alter the taste of a product," Cowland told this publucation.

Stevia success stories

However, she noted that after adverse publicity in summer 2011 due to high sugar levels, PepsiCo chose to reformulate SoBe V and launch the UK’s first stevia-sweetened soft drink in April 2012.

“This coincides with the marketing push for sports drinks before the 2012 London Olympics, but is it just a short-term sell?” she asked, adding that where PepsiCo led, other firms were bound to follow.

So could Cowland identify any runaway stevia-based success stories so far in the global beverage arena?

She told BeverageDaily.com: "The main success story has been Trop50 in the US which, in 2011 had retail sales of $160m, three years after being launched onto the market. However, Yakult Light, launched in July 2012 in the US, is sweetened with stevia with a 40% reduction in calories. It will be interesting to see how this product fairs on the market."