Coca-Cola, meanwhile, continues to experiment with steviol
glycosides, which are the sweet, calorie-free extracts from South
American stevia plants. The first cola version, called Coca-Cola
Life, was launched in Argentina in the summer. In the U.S., the
company is examining results from a recent test market of
stevia-infused line extensions Sprite Select and Fanta Select.
Midcalorie sodas
New formulations could potentially serve as the basis for future
advertising efforts for both companies, while providing shelter
from health critics and politicians who blame soda for the nation's
obesity epidemic. The negative attention has hurt sales: Soda
consumption continues to fall. Last year it declined 1.2%, which
brought the category to 1996 levels, according to Beverage
Digest.
It could also help them better compete in the latest cola
battleground: midcalorie sodas, which contain some, but fewer,
calories than regular sodas. "Getting new sweetener technology
appears to be absolutely critical," said John Sicher, editor and
publisher of Beverage Digest. "Whether these companies can get
natural sweeteners that bring the calories way down and preserve
good taste is really going to be what people are looking for over
the next year or two."
A recent Senomyx earnings statement heightened speculation about
PepsiCo's plans. It said that regulatory filings for S617 are "on
track" and that it anticipates that the ingredient will be
introduced into products in 2014. The company also works with food
and flavor companies, so it's possible that the launch might not
involve PepsiCo. But Senomyx is wedded to the soda marketer through
a four-year, $30 million deal struck in 2010 aimed, according to a
press release issued at the time, at commercializing "sweet
enhancers and natural high-potency sweeteners" in order to launch
"lower-calorie, great-tasting PepsiCo beverages." (The pact
includes an additional $32 million in "committed research and
development payments.") Senomyx expects to book about $30 million
in revenue for 2013.
PespiCo CEO Indra Nooyi on an October earnings call hinted at
products coming to market in 2014, adding that "we are staying on
the path of innovating along natural sweeteners and thinking about
flavoring agents to make sugar taste more sugary." A PepsiCo
spokesman told Ad Age that the company is pleased with Senomyx's
progress.
"There is a greater than 50% chance that S617 is a part of
PepsiCo's plans," Janney Capital Markets analyst Jonathan Feeney
told investors in a recent note. Mr. Feeney, who covers Senomyx,
also said that PepsiCo's "commitment to rejuvenating its large
[carbonated soft-drink] platform suggests that [S617] would likely
be marketed on a scale that could drive significant upside" to
Senomyx's stock shares. Still, he noted that it is possible PepsiCo
could change its product plans or include a competing
ingredient.
PepsiCo's last significant cola-formula change occurred in late
2012 when the company tinkered with the artificial sweetener in
Diet Pepsi, adding a second sweetener called acesulfame potassium,
or ace-K, to the existing sweetener, aspartame. The change, which
was aimed at keeping the sweetness at a consistent level, was
accompanied by a major ad campaign called "Love Every Sip" starring
Sofia Vergara.
Senomyx's S617 would seem geared toward use with drinks such as
regular Pepsi or Pepsi Next because its purpose is to "restore the
desired taste profile" of products whose levels of sucrose (sugar)
and high-fructose corn syrup have been reduced, according to the
company's website. (Diet Pepsi does not have sugar.)
Senomyx has deals with other food and ingredient companies
including Nestlé and Firmenich, a Swiss flavor and perfume
company that is in on the "sweet taste program" along with PepsiCo.
Senomyx has several taste modifiers already in market, including
S6973, which is designed to improve taste in products for which
sucrose (table sugar) has been reduced, such as baked goods and
powdered beverages. The company worked with Coca-Cola from 2002 to
2010, S6973, which is designed to improve taste in products for
which sucrose (table sugar) has been reduced, such as baked goods
and powdered beverages. The company worked with Coca-Cola from 2002
to 2010, but nothing was brought to market, according to a
Coca-Cola spokeswoman. Coca-Cola moved on to collaborate with
life-sciences company Chromocell. The New Brunswick, N.J. company's
website describes its flavor programs as using "natural cells
expressing native human taste receptors to discover novel flavor
substances, with a focus on natural compounds." A Coca-Cola
spokesman declined to elaborate on specifics.
Accelerated decline
Jonas Feliciano, a beverages analyst for Euromonitor International,
said that leaning too much on complicated chemistry might carry
risks as more consumers gravitate to raw, natural and organic
products. Modern consumers are concerned about more than calories,
he said in a statement. "Beverages innovations perceived as being
made in a laboratory carry a stigma that may prove difficult when
attempting to lure back lost customers."
On the October earnings call, Ms. Nooyi pointed to a recent
plunge in diet drinks. "People say they don't want artificial
sweeteners. They want natural sweeteners. They don't mind some
calories. They want to go back to sugar in some cases."
Senomyx's S617 would seem to allow for that. The company
estimated last year that it would allow for a reduction of as much
as 35% of the high-fructose corn syrup and up to 50% of sucrose in
prototypes.
Notably, S617 has gotten cautious support from the Center for
Science in the Public Interest, a health-advocacy group that is a
frequent critic of big food and beverage companies. "If they cut
the sugar in half with this stuff, that's huge," said CSPI
Executive Director Michael Jacobson.
While CSPI has not yet examined the research on S617, Mr.
Jacobson said he thought one reason why it could be safe is that it
would be likely used at low levels.
CSPI has petitioned the FDA to place a mandatory limit on added
sugar in beverages, blaming soda and other sugary drinks for
obesity, diabetes, heart disease and other health problems. The
petition, filed in February, cites Senomyx's products as among the
emerging technologies that "should make it increasingly easy to
reformulate soft drinks in ways that preserve taste and reduce the
added-sugars content."
To date, the biggest product response in the U.S. has come in
the form of so-called midcalorie sodas such as Dr. Pepper Ten 10
and Pepsi Next, which have been supported with major marketing
campaigns. The drinks are made from a combination of low-calorie
sweeteners and lower levels of regular sugar.
Coca-Cola's alternative sweetener of choice has been stevia,
which has the benefit of a natural image. It is typically blended
with smaller amounts of regular sugar to improve its taste. Since
2008, Coca-Cola has introduced more than 45 products sweetened with
stevia in 15 countries. Coca-Cola Life hit Argentina stores in June
and is supported with green-colored packaging.
PepsiCo also has used stevia, putting it in orange juice,
enhanced water and carbonated soda, although it has yet to
introduce a stevia-sweetened soda in the U.S. Coca-Cola
test-marketed stevia-sweetened Sprite Select and Fanta Select in a
handful of cities, trying a couple different formulas, including
one with 50% fewer calories than the regular brands and another at
33%. "Those tests have concluded, and we are currently assessing
the test data to determine if these support our brand and business
needs," a Coca-Cola spokeswoman said.
Just what is S617?
Senomyx's technology is based on the discovery in the mid-1990s by
biology professor and company co-founder Charles Zuker of unique
"receptor cells" on taste buds designed to detect flavors such as
sweet, sour, bitter and salty. Through an automated process, the
company has discovered and developed flavor ingredients, or
"modifiers," that bind to those receptors, like a key in a lock,
allowing for a very small amount to trigger a strong taste
sensation, like sweet.