Midcalorie sodas give jolt to Dr Pepper, Pepsi

With declining soft drink consumption, the companies are promoting lower-sugar alternatives.

By Trefis May 31, 2012 7:50PM
TrefisWith consumers ditching traditional soft drinks for healthier alternatives such as juices, brewed teas and coffees, soft drink companies Dr Pepper Snapple (DPS) and PepsiCo (PEP) are taking their midcalorie variants more seriously than ever to boost flagging soft drink sales.

Soft drink consumption has been continuously decreasing for the past seven years, according to Beverage Digest. But PepsiCo CEO Indra Nooyi says sales of its recently launched Pepsi Next have exceeded expectations. Similarly, Dr Pepper Snapple's Dr Pepper TEN helped the company post volume growth in its recently released quarterly data.

We estimate a $38.61 price for Dr Pepper Snapple, which is about 5% below the market price.


Harbinger?

The fact that beverage companies have been trying to make their portfolios healthier is nothing new, but the initial success of Pepsi Next and Dr Pepper TEN suggests that beverage companies could have been able to respond to changing consumer needs in a positive way.


Last month, Dr Pepper Snapple announced that its first-quarter results were buoyed by 2% volume growth in soft drinks, which is quite impressive given that overall soft drink volume is declining in the U.S. Soft-drink volume growth was helped by the launch of the mid-calorie Dr Pepper TEN in the last quarter of 2011. As the name suggests, the beverage contains only 10 calories.


Dr Pepper Snapple North America CSD Market Share

Given the generally positive reception the company has received for the beverage, it plans to introduce other Ten products nationally. According to Dr Pepper Snapple's CEO, Larry Young, the company is running the test products in four or five different markets.


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