Targets Consumers Who Drink Both Diet and Regular Colas

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CHICAGO ( -- Believing there's a growing number of consumers who regularly switch between diet and regular soft drinks, Pepsi-Cola North America said it
will launch Pepsi Edge, a "mid-calorie" cola designed for those equal-opportunity drinkers.

'Dual users'
Pepsi claims that roughly 60 million people are so-called dual users, drinkers of both regular and diet soft drinks, and that number that has jumped 75% in the past two years. To reach those dual users, Pepsi will roll out Pepsi Edge late summer with a "full slate" of marketing support.

"The time is right, the proposition is strong and everyone we've talked to is ready for this idea," said Dave Burwick, Pespi-Cola's senior vice president and chief marketing officer, told bottlers today at the company's national convention in Las Vegas.

Pepsi-Cola North America, based in Purchase, N.Y., is a unit of PepsiCo.

According to Pepsi, Pepsi Edge, flavored with a blend of high fructose corn syrup and artificial sweetner sucralose, is aimed at consumers who want less sugar but don't want to compromise on taste associated with zero-calorie sweetners. A 12-ounce can of Pepsi Edge will have 20 grams of sugar, 20 grams of carbohydrates and 70 calories, roughly half of full-sugar brands.

Consumers who stray
Ahad Afridi, Pepsi-Cola's vice president of innovation, said dual users make up 32% of the population and as much as 40% of the volume. Though he wouldn't break out what percentage of those consumers were more "diet dominant" vs. "regular dominant," he said consumers who drink full-calorie soft drinks are migrating to non-carbonated drinks such as water or juices.

"We looked across our brand and penetration and frequency," Mr. Afridi said. "We're not losing penetration, we're losing frequency. It's not because fewer people are drinking cola. They're drinking less of it."

Indeed, volume sales of regular colas are declining, with Pepsi-Cola down 4.5% and rival Coca-Cola Co.'s Coca-Cola Classic down 3% in 2003, according to Beverage Digest. Diet Pepsi by contrast is up 6.1% and Diet Coke is up 5% for the year. As a segment, diet soft drink volume is up 15%.

Stressing less sugar
Pepsi is in the early stages of marketing development for Pepsi Edge, and Mr. Afridi said the drink's reduced sugar content, rather than the lower calories, might play a strong part in the sales pitch.

"[Consumers] found appealing the reduction of that sugar level even though it directly linked to carbohydrates and calories," he said. "If you take out more sugar [consumers] get skeptical about how it's going to taste. We know Pepsi Edge is going to be about 50% less sugar [but with] full-flavored taste."

He conceded that some consumers may turn to smaller portions to control their sugar intake, which was one reason why Pepsi launched an 8-ounce can earlier this year. But he countered that Pepsi Edge is for consumers that want a product with "great taste as well as the diet-like benefits."

Bill Pecoriello, a beverage analyst for Morgan Stanley, said he expects Coca-Cola to roll out its own mid-calorie cola, Coke Ultra, during the peak spring/summer season.

Cannibalize existing colas?
"The issue with mid-calorie colas will be whether they just cannibalize existing colas and diet colas," he wrote in a note to investors. "The issue is whether the current sweetener technology allows for the same taste at a 50% calorie reduction or only at a 30% calorie reduction." He said the 50% sugar cut was "greater than we expected from the Pepsi product," and he predicted Coke would do the same.

"Our view is that these drinks likely need a reason for being beyond just being 'reduced calorie' versions of existing products, otherwise they will largely be cannibalistic," Mr. Pecoriello added. "However, with a compelling point of difference, they can perhaps create large new categories that drive growth."

Skeptical bottler
One independent bottler is skeptical that there is enough sucralose for both diet and mid-calorie brands -- and even whether reducing the sugar will be enough incentive for consumers to drink more soda.

"Mid-cal is too many calories," the bottler said. "If you want half as many calories, then drink half a bottle."

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