Drinking games: the popularity of diet beverages is at an all-time high, augmented by the growing variety of effective sweeteners on the market. Yet, one segment's boon is another's disappointment, as sales of regular versions falter

Prepared Foods, Nov, 2004 by William A. Roberts, Jr.

A Little Flavor

The popularity of diet drinks coincided with the public's growing concerns about health and obesity, not to mention the efforts of various food companies and foodservice establishments to address caloric content, as well as negative publicity surrounding high-fructose corn syrup and other forms of sweeteners. However, a look at the success of diet carbonated drinks has to consider the improvements made to the products. Since 2000, consumers have seen a wave of flavor extensions, both to regular and diet varieties. While lemon and vanilla had their allure in the regular versions, a number of consumers (particularly those who may not care for the taste of artificial sweeteners) may have prized the masking efforts of such flavors in their diet drinks. Furthermore, the use of sucralose has been hailed as a vast improvement for diet beverage offerings.

In both regular and diet carbonated drinks, the same companies lead the pack, though Coca-Cola leads PepsiCo by a wider margin in the diet segment. Each saw increases in diet sales, as did the offerings from number-three Cadbury-Schweppes. Not only did new diet offerings boost sales--even established brands enjoyed a growth spurt between 2001 and 2003.

The Coca-Cola stable of diet carbonated drinks maintained its lead in the segment during the period under review, but PepsiCo's batch was the one that managed to increase market share between 2001 and 2003. The battle here would appear to rest in the lemon-lime area.

Sierra Mist, PepsiCo's own lemon-lime carbonated beverage, debuted during the period under review and was accompanied by a diet version. While envisioned as a competitor for Coca-Cola's Sprite and Cadbury-Schweppes' 7Up, the latter experienced a significant sales decline, dropping $21 million (15%) between 2001 and 2003. Diet Sierra Mist sold $66 million in 2003, its second year, while sales of Diet Sprite grew.

Cadbury-Schweppes has made efforts to rejuvenate the 75-year-old 7Up brand (both the regular and diet versions), as sales have drifted downward for the better part of 20 years. In fact, the brand has not posted any growth at all in a decade. PepsiCo's launch of Sierra Mist certainly did not help matters, considering that, by the end of the 1990s, 7Up relied heavily upon the Pepsi bottling system, which accounted for about 40% of the brand's U.S. sales volume. By the start of 2003, Sierra Mist was the lemon-lime choice for most of Pepsi's bottling system. As a result, 7Up can be found fairly easily in supermarkets, but Coca-Cola and PepsiCo have vast systems to reach smaller stores and vending machines--not to mention 7Up's travails at retaining fountain accounts.

Despite this challenging environment, 7Up is not backing down. The brand is launching 7Up Plus, a carbonated, caffeine-free beverage fortified with calcium and vitamin C. The lemon-lime also boasts a splash of real fruit juice. Only time will tell if this fortified effort will be successful, but consumers have embraced flavored versions of established brands in the past, as evidenced by the success of Diet Cherry Coke, Diet Vanilla Pepsi and Diet Mountain Dew Code Red, the latter a PepsiCo offering.