Pepsi tries again with a mid-calorie soda

The company wants to reach customers who don't like diet or regular soft drinks.

By Kim Peterson Feb 23, 2012 1:25PM
Image credit: PepsiCoHate the taste of diet soda but don't want all the calories of regular? PepsiCo (PEP) has a beverage for you.

The company is trying once more to fill the void between diet and regular with Pepsi Next, a soda with half the calories of regular Pepsi. With 60 calories in a can, it's expected to be available nationwide by the end of next month.

But does Pepsi Next have any chance of success? The odds are stacked against it. Does anyone remember Pepsi Edge? That was Pepsi's previous attempt at a lighter cola, launching in 2004 with 50% less sugar and calories. One year later, it was canned.

Rival Coca-Cola (KO) tried the same strategy around the time with Coke C2, only to discontinue it a few years later.

People don't want a soda with half the calories. They want either the real thing or a zero-calorie beverage that tastes good enough.

Is PepsiCo a good stock for your portfolio? Hear one analyst's views in the following video.

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Given that checkered past, analysts are understandably skeptical about Pepsi Next. Bill Pecoriello of Consumer Edge Research thinks the drink just won't taste enough like Pepsi, according to beverage industry news site Bevnet. A mid-calorie cola with artificial sweeteners will probably taste a lot like Pepsi Edge -- and that didn't go so well.

But Pepsi executives say the new drink will be better than Pepsi Edge. "The way we formulated products 20 years ago was very different," the company's American beverages head said last year, according to Reuters. "You wouldn't play tennis with a wooden racquet today."

PepsiCo needs all the help it can get right now. The company recently forecast a 5% decline in 2012 earnings as higher materials costs eat into the bottom line. CEO Indra Nooyi said the company will cut 8,700 jobs in what she described as a "transitional year."

Pepsi shares are flat from a year ago and traded Thursday just below $63. Coca-Cola shares are up 8% in the same period. Coke still dominates the soft-drink market, with a share of 42% to Pepsi's 29.3%.

The company has come under fire for turning its focus away from sodas to healthier food products, such as oatmeal. So it's responding with a renewed push into Pepsi, Mountain Dew and Gatorade, among other brands. It will raise its advertising and marketing budget by as much as $600 million this year.

So expect to hear quite a bit about Pepsi Next. It's going to take some effort on the company's part to persuade consumers to abandon zero-calorie and full-calorie drinks for something in the middle.

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Tags: KOPEP
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