Business Strategy

The soda industry’s problem is bigger than aspartame

The soda industry’s problem is bigger than aspartame

Can getting rid of a maligned ingredient help battle declining sales? That’s something many CPG pros will soon discover, as a big soda company makes a major gamble in an attempt to lure back customers.

Earlier this month, PepsiCo introduced a new Diet Pepsi. The soda giant removed the artificial sweetener aspartame in its formula, replacing it with a mix of sucralose (better known by the brand name Splenda) and acesulfame potassium. The company says customer feedback drove the decision, as more Diet Pepsi customers were raising concerns about aspartame, an ingredient that some believe is linked to cancer. For now, the reformulated drink is only available in the U.S.

“It’s the number one thing that our customers have been calling about,” Seth Kaufman, a senior vice president at PepsiCo, told Mashable. The company said the taste of the new formula is identical to the old one. The hope is that the aspartame-free formula will boost Diet Pepsi sales, which fell 5.2 percent in 2014.

So far, customers don’t seem impressed with the revamped formula.

“They’ve ruined @dietpepsi! The new “aspartame free” #DietPepi has an AWFUL aftertaste,” reads one tweet. “Holy sucralose, batman. The new @dietpepsi is terrible,” tweets another customer. The company’s Facebook page is also inundated with complaints about the change.

That strong negative response is surprising given that three quarters of customers who tested the new formula gave favorable reviews. And while social media buzz rarely reflects the true sentiment of most customers, the company says it is “keeping a close eye on feedback” now that the new Diet Pepsi is out in the market.

“We’re really confident that consumers will love aspartame-free Diet Pepsi,” Elisa Baker, PepsiCo’s director of brand communications, told Business Insider.

It’s not just PepsiCo that’s watching customer reaction to the new Diet Pepsi. Many in the food and beverage industry, including Pepsi rival Coca-Cola, are eager to find out if removing aspartame can really get customers drinking sodas again. Alexander Douglas Jr., executive vice president & president of Coca-Cola North America, admitted during his company’s latest earnings call that it is monitoring customer reaction to Pepsi’s move.

Abandoning aspartame isn’t a light decision. The artificial sweetener has been in use in diet sodas since 1983, and despite its bad reputation among many customers, research suggests that it may not be as bad as some believe. This big move reflects the precarious condition of the soda industry, which is thirsty for sales growth after a decade of decline. It also shows just how powerful customers today are. After all, Pepsi openly admits that customer perception of aspartame motivated the move.

low calorie soda sales from 2000 to 2019

Photo: washingtonpost.com

If going aspartame-free works out for Diet Pepsi, the move could become a game-changer for the soda industry. In recent years, the industry has taken a lot of blame for contributing to America’s obesity problem. Both Pepsi and Coke have made strides in offering healthier products and in rebuilding their reputation as health-conscious brands, but some of these moves have gained criticism. Recently, Coca-Cola found itself in a PR firestorm after the public learned that the company was funding influential scientists who were claiming that lack of exercise, not sugary drinks, were to blame for obesity.

That said, offering healthier products may not be enough to get customers back, especially millennials. Young customers have developed an obsession with food and favor artisanal products and natural ingredients. Because of this obsession with “real” food and the wide availability of information about soda drinks today, millennials are not drinking as much soda as their parents did.

At the same time, soda companies can’t tinker mindlessly with their products. As the strong social media reaction to the revamped Diet Pepsi shows, soda drinks have developed a loyal—although increasingly diminishing—following. The last thing Pepsi or Coke should be doing right now is turning off their loyal customers. These brands need to find the right balance between going after new customers and keeping current soda drinkers happy.

The solutions to the soda industry’s many problems likely won’t be simple. To address the complex issues they’re facing, soda companies will need to become even more intelligent about customers’ tastes.

The good news is that both Coke and Pepsi seem to be doing that already. As noted above, Pepsi consulted with customers before making changes to Diet Pepsi. As for Coke, the company successfully introduced “mini-cans,” smaller packages of its beverages aimed at health-conscious shoppers who still want to indulge in soda drinks. That type of product innovation can only come from a deeper and sophisticated understanding of today’s customers.

Only time will tell whether Pepsi’s aspartame-free gamble pays off or become the New Coke. Pepsi is doing the right thing by listening to customer feedback. The company needs to take it further, and gain a more holistic understanding of the motivations, needs and attitudes of today’s customers. The only way the soda industry can increase sales once again is by committing to a two-way, continuous engagement with the empowered, health-conscious customer.

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  • superspectral

    Pepsi is trying to sell more Diet Pepsi by appealing to an intangible perception that is scientifically false by making their soda taste tangibly worse. Pepsi announced this change months ago and their was no social media outrage, but I suspect most Diet Pepsi fans weren’t paying attention or didn’t think it would matter. But as soon as the new Diet Pepsi arrived on the shelves, people started noticing that the new drink developed a wicked aftertaste. It was the tasting that ignited the firestorm of complaints. Outraged fans asked themselves, why on earth would Pepsi do this? The answer seams to be to *maybe* persuade a few people who probably are inclined to believe that any artificial sweetener is toxic despite ample scientific evidence of their safety? How likely is that to hit the ball out of the park? This is the kind of strategy that only makes sense at 3 am when you are likely think it is good idea to leave a rambling message on the answering machine of your ex-girlfriend. So, I think people are not only unhappy with they taste, they also feel terribly patronized. That a company run by presumably smart people would patronize their customers AND give them the shaft with a terrible tasting recipe is leaving many Diet Pepsi fans apoplectic.

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