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Coca-Cola Tests Natural Sweeteners

Stocks in this article: KO PEP DPS

NEW YORK ( Trefis) -- In a recent article, we talked about the growing competition in the mid-calorie soda market in the U.S. PepsiCo (PEP) had launched Pepsi Next in March this year and so far the response has exceeded the company's expectations.

Similarly, Dr Pepper Snapple (DPS) launched Dr Pepper TEN in the last quarter of 2011, which helped the company post 2% volume growth in the soft drinks in Q1 2012. And now its Coca-Cola's (KO) turn to test its mid-calorie versions of soft drinks Sprite and Fanta. The drinks are being tested in select stores in Atlanta, Detroit, Louisville and Memphis.

We estimate a $76 price for Coca-Cola, in line with the market price.

See our full analysis for Coca-Cola.

Natural Sweeteners

Coca-Cola had rolled out the mid-calorie version of its flagship drink named C2 in 2004 but took it off due to poor sales. Hence, the company has decided to give it a shot with Sprite and Fanta this time.

A regular 12-ounce can of Sprite has 140 calories (and Fanta contains 160 calories). However, their mid-calorie versions will both have 70 calories a can. Coca-Cola's new drinks are made up of natural sweeteners. On the other hand, Pepsi Next uses a mix of high-fructose corn syrup and three artificial sweeteners. Mid-calorie sodas appeal to consumers who avoid regular colas to reduce calories but shy away from diet versions that do not taste the same.

If the results of the tests meet the company's expectations, the drinks will be rolled out on a national basis and even internationally. This is a crucial time for soft drinks as they (along with fast-food companies) face the heat for rising obesity rates.

Recently, the Canadian Beverage Association made it mandatory for the soft drinks to clearly spell out how many calories are present in the beverage on the front of the packaging (following the U.S.'s "Clear on Calories" guidelines). Total soft drink consumption has been declining in the U.S. for the last seven years as consumers chuck traditional soft drinks for healthier alternatives.

However, it remains to be seen if the success of the mid-calorie beverages is temporary in nature or here to stay for the long run.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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