Can New Flavors Reverse Diet Coke's Slump?

01/22/18 07:14 AM EST
By Cara Lombardo 

Coca-Cola Co. hopes four new flavors of Diet Coke and skinnier, redesigned cans hitting U.S. shelves this week will lure back lapsed soda drinkers and young people who have moved on to LaCroix sparkling waters.

But initial consumer response has been mixed, with much of the enthusiasm coming from existing Diet Coke drinkers and some analysts saying the overhaul is a long-shot attempt to boost Diet Coke's slumping sales.

"I am very much a Coke product purist, especially when it comes to Diet Coke," said Ayana Lage, a 24 year-old writer from Fort Lauderdale, Fla., who drinks one or two Diet Cokes a day. "The chances of me branching out are slim to none."

U.S. sales by volume of the calorie-free beverage sagged an estimated 4.3% in 2017, according to industry publication Beverage Digest. Demand has been sapped by consumer concerns about artificial sweeteners used in the drinks and a broad shift to bottled waters. Diet Coke's sales volume in the U.S. has declined every year since 2006, according to Beverage Digest.

Coca-Cola earlier this month unveiled four new flavors of Diet Coke -- Zesty Blood Orange, Twisted Mango, Ginger Lime and Feisty Cherry -- and slender 12-ounce cans with bright vertical bands of color. Regular Diet Coke got a matching makeover, though the recipe remains the same and it will continue to be available in traditional cans.

The new lineup is entering a space occupied by both sparkling water and other flavored no-calorie and low-calorie drinks, including stevia-sweetened Zevia, Virgil's Zero from Reed's Inc. and Dr Pepper Snapple Group Inc.'s Bai Bubbles. Coca-Cola also has two of its own sparkling water lines, Dasani and the pricier Topo Chico.

Sabina Bhasin, marketing manager of analytics firm Networked Insights, said its researchers scanned social media networks, blogs and other forums and found 89% of the mentions of the new drinks were positive, with people particularly eager to try the Ginger Lime flavor. They also noted there was confusion over why the blood orange flavor wasn't just called "Zesty Orange."

Another analysis, this one of 15,000 social media posts, showed a largely neutral stance toward the brand revamp but with slightly more negative comments than positive, according to Bernstein analyst Ali Dibadj. Mr. Dibadj said many of the positive comments came from existing Diet Coke drinkers.

Since the new drinks don't address growing consumer aversion to artificial sweeteners, Mr. Dibadj said he is skeptical about their success. "Most new products in beverages-land are a flop," he said in an interview.

A Coca-Cola spokesman said the company's portfolio includes dozens of other drinks without artificial sweeteners. "The truth is Diet Coke is a great-tasting brand and what all people have told us in all of our research is 'Do not change the taste of Diet Coke,"' he said.

The company, which in 1985 introduced a reformulated Coke with disastrous results, said it spoke to more than 10,000 people across the country and tested more than 30 flavor combinations before settling on the final products.

Pablo Zuanic, an analyst with Susquehanna Financial Group, said in a research note that U.S. soda sales have declined by $1.2 billion over the past five years, while sparkling water sales grew by $1.4 billion, according to retail sales data from market research firm IRI. He described Diet Coke's rainbow-colored cans and playful flavor names as a "wink" at National Beverage Corp.'s LaCroix, which he said accounted for almost half of sparkling water growth in 2017.

The new flavored versions of Diet Coke are sweetened with a blend of acesulfame potassium, or Ace-K, and aspartame, which the company spokesman said was necessary to get the right type of sweetness. Regular Diet Coke only includes aspartame. The company already uses a blend of Ace-K and aspartame in Coke Zero Sugar, which it rolled out in the U.S. last year.

Joshua King, 30, said he and his wife stopped drinking soda a few years ago, giving it up while on a diet and realizing they could do without it. Now they regularly buy LaCroix at Costco, where they can get variety packs with rotating flavors.

Mr. King, a communications manager in Tallahassee, Fla., said he would be open to trying the new Diet Coke flavors, but that it is unlikely he would start regularly drinking soda again. "It has more to do with the health decision for us," he said.

Write to Cara Lombardo at cara.lombardo@wsj.com

 

(END) Dow Jones Newswires

January 22, 2018 07:14 ET (12:14 GMT)

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