Trends in U.S. soft drink consumption - demand implications for low-calorie and other sweeteners - U.S. Dept. of Agriculture, Economic Research Service report

Situation and Outlook Report: Sugar and Sweetener, Sept, 1991 by William Moore, Peter Buzzanell

* Sugar was replaced by HFCS on the basis of price,

wholesale refined beet sugar sold for an average of 23

cents a pound in 1985, while HFCS-55 sold for 20 cents.

The potential exists for aspartame to do the same to

HFCS if its price drops below HFCS. * Manufacturers make choices in an industry that is highly

competitive. Costs on 6 billion cases of diet drinks could

be lowered $700 million per year with an 8 cents per

pound decline in sweetener prices. * Currently there is widespread consumer acceptance of

aspartame in diet soft drinks. * Consumers' tastes change over time, with help from

industry. * The switch would reduce calories, which would not be

difficult to sell to consumers. Arguments against substitution (15):

* Aspartame came off patent in Canada in 1986, and today

regular soft drinks still have 70 percent of the market. * Significant taste differences exist, and loyalty is not

quickly transferred. * Diet soft drinks and regular soft drinks are two separate

products and do not compete on the basis of price. * New sweetener alternatives for soft drinks may include

sucralose (600 times sweeter than sugar); acesulfame-K,

(200 times sweeter than sugar); and alitame, (200 times

sweeter than sugar).(13/) It is possible bottlers will pay

more for these alternative sweeteners, if the quality is

superior.(14/) * The cost of sweetening an 8 ounce can of soda is less than

0.5 cents, therefore quality factors are likely to override

price advantages. Projections to the turn of the century for soft drink industry growth suggest its sweetener demand will be up significantly. However, both the aggregate level of usage and the composition of that demand among sweeteners is difficult to judge. While it appears unlikely sugar will regain the market it lost to HFCS in regular soft drinks--HFCS still maintains a price advantage over sugar--some substitution of the HFCS market by lower priced aspartame appears plausible. Less certain is the composition of low-calorie sweetener demand among approved ingredients such as aspartame and saccharin and yet-to-be-approved ones for soft drinks such as acesulfame-K, sucralose, alitame, or a re-approved cyclamate. It is possible the focus of future change will be the competition for diet market share among the low-calorie sweeteners available to the soft drink industry during the 1990's (6). In addition, the prospect of expanded sweetener blending, spurred by efforts to optimize costs, enhance taste, and utilize other qualities, is another aspect of the market where change could be significant (7, 14, 25).(15/) All in all, the 1990's are likely to be a challenging decade not only for the soft drink industry, but also for those marketing sweeteners, buyers of ingredients, and analysts attempting to gauge the direction of the market. [Table D-1 to D-3 Omitted] [Figure D-1 to D-4 Omitted]

(1/)William Moore is an economist in the Sweeteners Analysis Section, Peter Buzzanell is Leader, Sweeteners Analysis Section, Commodity Economics Division. (2/)John Maxwell Jr., Wheat First Securities is the director of research and statistics for Beverage Industry. (3/)Soft drink industry data is presented in cases of 24 cans or containers of 8 ounces each equal to 192 fluid ounces. (4/)Of the currently FDA approved low-calorie sweeteners saccharin is 300 times sweeter than sugar, and aspartame is 180 times sweeter (cyclamate is 30 times sweeter than sugar). (5/)The low-calorie sweetener estimate for 1980 uses saccharin as the sole sweetener. In 1990, the estimate uses only aspartame, although there is an undetermined quantity of saccharin used in fountain syrups and concentrates produced for soft drink bottlers. (6/)Cola type soft drinks are used as the standard. Amounts of sugar or HFCS needed to sweeten lemon-lime, other fruit flavors, root-beer, or ginger ale vary. (7/)Note that in 1990 about 90 percent of the HFCS-55 deliveries were to soft drinks, while 42 percent of HFCS-42 went to soft drinks. In 1980, these shares are estimated at 94 percent and 18 percent, respectively. (8/)The low-calorie sweetener acesulfame-K is approved for soft drinks in parts of Europe and sucralose has recently been approved in Canada. (9/)In several diet brands, cyclamate and saccharin were blended in a 10:1 ratio, with each of the sweeteners supplying half of the sweetness. The cyclamate/saccharin blend was synergistic--meaning the sweetnesses are multiplied. This has the effect of lowering any bitter aftertaste that can be found when using a single low calorie or high intensity sweetener. (10/)According to industry research, saccharin alone in beverages tends to have a somewhat bitter aftertaste. (11/)Bottlers reportedly paid 45 cents a pound, sugar sweetness equivalent, when aspartame was initially introduced in soft drinks. (12/)According to an industry source, 20 percent of all aspartame used in soft drinks are in fountain drinks. There is one fifth the amount of aspartame in a 8 ounce serving of a fountain drink as there is in a can of diet soft drink. (13/)All three low-calorie sweeteners have petitions before the FDA for use in soft drinks. (14/)Quality advantages could include improved stability at high temperatures and longer shelf-life, solubility, and no adverse interactions with other soft drink ingredients. (15/)If or when the FDA reapproves cyclamate, at a technologically desirable use level. The cyclamate/saccharin mixture has the potential to become a formidable competitor with aspartame and other low calorie sweeteners, both on a price and relatively aftertaste free basis in the 1990's. Although the current petition limits cyclamate use to a lower ADI, than before 1970.