Pepsi hopes half-measure is full-blown success

NEW YORK?? Pepsi is hoping to win back soda drinkers with a compromise.

Some people don't like the calories in regular soda, but loathe the taste of zero-calorie diet drinks. So America's No. 2 cola company is rolling out "Pepsi Next," a cola that has about half the calories of regular Pepsi at 60 calories per can.

The cola, which is slated to hit store shelves in the U.S. by the end of March, is Pepsi's biggest product launch in years. The drink comes as people increasingly move away from sugary drinks to water and other lower-calorie beverages because of health concerns. It's also an attempt by Pepsi to revive the cola wars against Coke and others.

Pepsi Next isn't the first drink to try to hit the sweet spot between diet and regular cola. Dr Pepper Snapple rolled out its low-calorie Dr Pepper Ten, which has 10 calories. The company said the drink, which has sugar unlike its diet soda, helped boost its fourth-quarter sales.

But coming up with a successful "mid-calorie soda," which has more calories, has been more challenging for beverage makers. In 2001, Coke rolled out "C2" and Pepsi in 2004 introduced its "Pepsi Edge," both of which had about half the calories of regular soda. Both products also were taken off the market by 2006 because of poor sales.

"The problem was that consumers either wanted regular soda or a diet drink with zero calories ? not something in between," said John Sicher, editor and publisher of Beverage Digest.

Pepsi says its latest stab at an in-between soda uses a different formula to more closely imitate the taste of regular soda. Pepsi Next is made with a mix of three artificial sweeteners and high fructose corn syrup.

A Pepsi spokeswoman, Melisa Tezanos, said the company developed the cola by researching the "taste curve" that consumers experience when drinking regular soda. She compared that arc to how someone might evaluate a sip of wine, from the moment the liquid hits the tongue to the aftertaste it leaves.

"We wanted to develop a taste curve that gives the full flavor of regular Pepsi," Tezanos said.

Pepsi Next also follows the company's lower-calorie variations of its other drinks. Gatorade, a unit of Pepsi, has "G2," which at 20 calories has a little less than half the calories of the original version. And the company's Tropicana unit introduced "Trop50," which is half of the 110 calories in a regular 8-ounce (225-gram) glass of orange juice.

But orange juice and sports drinks have nutritional benefits that a drink maker can market. A mid-calorie soda is a tougher sell because it provides only empty calories. So health-conscious drinkers usually opt for diet soda or quit soda altogether.

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Sales in the $74 billon soft drink industry have been fizzling out, with volume falling steadily since 2005, according to Beverage Digest, which tracks the industry. Meanwhile, healthier drinks are growing more popular, with bottled water accounting for 11 percent of all beverages consumed in 2010, up from 2 percent in 2000. Consumption of sports drink rose to 2.3 percent, from 1.2 percent.

Diet soda also rose to 29.9 percent of the carbonated drink market in 2010, up from 24.7 percent a decade earlier. To keep up with changing tastes, Coke and Pepsi have introduced newer versions of their diet drinks ? Coke Zero and Pepsi Max ? that promise a taste that's more like their regular sodas.

Pepsi hopes Pepsi Next will help it gain back the market share it's lost in recent years. The company's namesake drink had its share in the carbonated soft drink market fall to 9.5 percent in 2010, from 13.6 percent a decade earlier, while Diet Pepsi's share remained steady at 5.3 percent.

Coke is still the top selling brand, with 17 percent market share. Diet Coke follows with 9.9 percent.

PepsiCo Inc., based in Purchase, New York, said earlier this month that it plans to increase marketing for its brands by $500 million to $600 million this year. A centerpiece of that will be the company's first global ad campaign this summer, a peak time for the soda market.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source: http://www.msnbc.msn.com/id/46503188/ns/business-retail/

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