Pepsi eyes vanilla, readies Dew spinoff

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Pepsi-Cola Co. is considering playing follow the leader with a vanilla-flavored version of its flagship cola. The company is also set to debut Mountain Dew LiveWire, an orange-flavored offshoot of its popular brand.

Pepsi had publicly spurned a vanilla line extension. But it revisited the concept because of the resounding success of Vanilla Coke, which has leapfrogged more established brands after only eight months of national distribution to become the country's No. 15 soft drink.

"It's been Coke's Code Red," said one soft-drink executive, referring to Pepsi's fast-selling Mountain Dew line extension, which moved 94 million cases last year. Vanilla Coke has sold 90 million cases since its May 2002 launch, according to Beverage Digest, which first reported on Pepsi's plan.

Pepsi declined to comment. The marketer is exploring whether vanilla can be a standalone cola category, like cherry, or whether it's a niche that can't support two brands, according to a bottler and another executive familiar with Pepsi. A decision is expected by late spring.

Omnicom Group's BBDO Worldwide, New York, handles both Pepsi and Mountain Dew.

Morgan Stanley analyst Bill Pecoriello predicted that while Pepsi could benefit moderately from a vanilla cola, the category could shrink when the novelty wears off.

Pepsi's new-beverage machine is slowing this year as the marketer and its bottlers try to digest last year's gusher of products. In 2002, Pepsi tested or came out with 10 new lines including Diet Sierra Mist, Aquafina Essentials, Pepsi Blue, Lipton Brisk Lemonade and Dole Smoothers, and the company has credited innovation with boosting financial results.

Rather than a massive new product push, innovation this year could rely as much on packaging and other strategies to grab consumer attention. Pepsi, however, is expected to heavily support the new products it has out there, with Sierra Mist in for a windfall as it launches nationally this year. LiveWire should get a lot of exposure in the months leading up to Labor Day, when it will be available.

Mr. Pecoriello said in a report that Vanilla Coke had helped Coca-Cola Co. gain share over Pepsi among carbonated soft drinks. Early last year, Pepsi acknowledged it lost share and said it would do whatever was necessary to stem the damage.

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