For

Pepsi One

, summer 1999 may be one big taste test.

While

PepsiCo

(PEP) - Get Report

, the world's No. 2 soft-drink maker, says its new drink is performing well, grocery-store and convenience-store managers say the brand isn't generating a big buzz among consumers. In a series of interviews, the managers were neutral at best -- and dismissive, at worst -- of Pepsi One, which was launched in October.

"It hasn't set the world on fire," three managers say.

Retailers' comments, while offering only anecdotal evidence, highlight the challenges PepsiCo faces as it seeks to carve Pepsi One a permanent market niche as a low-calorie, good-tasting cola. The company, whose Pepsi and Diet Pepsi brands both lost ground last year, has made a big investment in the brand: some $100 million in marketing and promotional costs, analysts say. Those expenses contributed to a 27% drop in fourth-quarter North American beverage operating profit. While the most recent data show the brand cracking the top 10, it remains to be seen whether Pepsi can keep it there after the initial marketing and promotional push fades.

Pepsi says it has the makings of a hit on its hands and that the cola led the company's 10% North American volume growth in the fourth quarter.

"Our data show that consumers are excited," says Steve Fund, Pepsi One's director of marketing, citing 80,000 respondents to a survey on the product's Web site and data showing consumers who are buying Pepsi One are trading up to larger bottles. Since its launch, Pepsi One's share has run from about 2% of the market, reflecting the hype around the launch, to about 1.4% currently.

"That's exactly where we want to be," says Fund. Analysts say the initial surge and subsequent slight drop in sales are customary for a new product, and that market share will climb again if the drink is a hit. If Pepsi One can end the year with a 1% share of the $56 billion soft drink industry, "that will be a significant success," says John Sicher, editor and publisher of

Beverage Digest

.

But retailers say the initial wave of interest in the product -- sparked by price promotions, lots of publicity about its new Ace-K sweetener and an ad campaign featuring

Cuba Gooding Jr.

(finally saying something other than "show me the money") -- is ebbing. To attract consumers, they say, Pepsi has to do some serious brand-building this summer.

"It's not doing much of anything. I don't see it come through the checkstand much," says one supermarket manager in California who asked not to be identified.

"Out of all the Pepsi drinks, it's the slowest mover," says a supermarket manager in New Jersey. "I don't know where they're going with it."

Pepsi intends the brand to reinvigorate the less-than-sizzling diet cola segment, which has been losing ground to bottled waters and other no-calorie flavored drinks. Part of its plan to grow that category includes pulling in the gut-conscious guys who read

Men's Health

at home but whose egos prevent them from being seen holding a diet drink. Pepsi's Fund says the brand is succeeding on both counts.

But some retailers say despite the splashy ad campaign, many still don't have a fix on the brand. "After six months, you still hear 'Pepsi One, what is this?' in stores," says the merchandising manager at a major convenience-store chain who didn't want to be identified.

The company may be listening: A new series of Pepsi One ads featuring

MTV's

Tom Green began running during

NCAA

basketball tournament broadcasts, with a focus on convincing people to sample Pepsi One.

Even consumers familiar with the name may not know what kind of cola it's supposed to be: regular, diet or both. "While Pepsi One offers a very unique feature -- low calorie and full tasting -- at the consumer level, I'm sensing a high level of confusion," says Skip Carpenter, an analyst with

Donaldson Lufkin & Jenrette

, who rates PepsiCo a buy. DLJ hasn't done any underwriting for Pepsi.

James Lee Jr., chairman of Birmingham, Ala.-based Pepsi bottler

Buffalo Rock

, says while he's a huge fan of the product, he agrees there's been some trouble distinguishing between Pepsi One and Diet Pepsi. "You'll find

Pepsi's marketing and advertising improving as they go along," says Lee.

Some marketing experts say there's also a fundamental problem with having three cola drinks under the Pepsi name: cannibalization. "If you win, you lose, and if you lose, you lose," says Al Ries, chairman of Atlanta-based marketing firm

Ries & Ries

. "A line extension always does well in the short run, but in the long term, strategically it's a bad move. A better move would have been to put the new sweetener in Diet Pepsi," he says.

"At some point, they're going to have to come to the crossroads: You can only really have one diet cola," agrees Tom Pirko, president of consulting firm

Bevmark

.

Not so, if the brand continues to spark growth in the overall diet-soda category and in the overall Pepsi brand, says

Goldman Sachs

analyst Marc Cohen, who rates PepsiCo shares a buy. Goldman is one of the underwriters on PepsiCo's upcoming spinoff of its bottling unit.

Whether those gains can be sustained isn't clear. A similar drink, marketed in parts of Europe under the name

Pepsi Max

, didn't boost Pepsi's overall share, says Ries, whose firm has done work for Pepsi's Frito-Lay unit. Pepsi's Fund says Pepsi Max is "an entirely different product."

The calorie-counting culture may also be passe. "Americans are feeling good about themselves, and they think they're never going to die. For all intents and purposes, they're not interested in fat-free anymore," says Robert McMath, who runs the

New Products Showcase and Learning Center

in Ithaca, N.Y., and is the author of

What Were They Thinking?

, a history of failed products.

Of course, it's easy to be a skeptic when it comes to new product launches. Most flop, and the soft drink industry has had some notorious missteps.

Coca-Cola

(KO) - Get Report

had its infamous

New Coke

and

OK Soda

(pitched just a little too self-consciously at the Gen X crowd), while Pepsi's previous failures include

Crystal Pepsi

(which Pepsi initially hoped would grab about 2% of the market) and

Pepsi a.m.

Just last week, Pepsi threw in the towel on

Josta

, its guarana berry-flavored soft drink.

Because of the industry's track record, even Pepsi One enthusiasts say it's too soon to tell whether it will be a real hit. "Any new beverage product has to go through a full year, especially a summer, before we know how it really ends up," says

Beverage Digest's

Sicher. Returns to the company, says DLJ's Carpenter, will take even longer to show up -- until 2001 or 2002.

And because it's invested so much in the brand, look for Pepsi to tinker with it if sales flag -- all the while talking up its success.

As originally published this story contained an error. Please see

Corrections and Clarifications.