Stevia-Sweetened Coca-Cola Life To Be Launched In The U.S.

While the U.S. liquid refreshment beverage market (LRB) remained flat in 2013, carbonated soft drink (CSD) volumes, which constituted 43% of the net volumes by our estimates, declined for the ninth consecutive year in the country. ^[1] Health and wellness concerns continue to cast a shadow over sugary sodas. Consumers have also remained skeptical about the safety of artificial sweeteners in the low/no calorie versions of these drinks. The use of the natural sweetener stevia has also met criticism, as customers find the tastes of their favored sodas altered. However, despite the slowdown in demand for diet soft drinks, beverage makers such as The Coca-Cola Company (NYSE:KO) remain committed to the goal of finding a solution to the high sugar problem in soft drinks, without compromising taste and quality. The company launched its naturally-sweetened Coca-Cola Life in Argentina and Chile, and after months of testing, the drink is set for introduction in the U.S. and U.K. markets this year. Coca-Cola will aim to spur sales of its ailing diet segment with the launch of Coca-Cola Life in the U.S., and look to further sales in the stabilizing U.K. market.

We estimate a $40.99 price for Coca-Cola, which is roughly in line with the current market price.

See our full analysis for Coca-Cola

Stevia-Sweetened Drink Could Face Criticism In The U.S.

The diet CSD category continues to underperform the overall U.S. LRB market. Diet Coke, which accounts for almost one-fourth of the retail sales of diet CSDs in convenience-stores, witnessed a 6% fall in unit sales in the twelve-week period ending April. In contrast, Diet Pepsi’s volumes fell by only 3.3%. ^[2] Coca-Cola had already launched its low calorie Coca-Cola Life in Argentina in June last year, and followed it with the launch of the drink in Chile in November. Sold in green colored cans, Coca-Cola Life caused a 7% rise in beverage volumes in Argentina last year, despite weak economic conditions in the country. After months of testing, the company is set to launch the product in the domestic market, in a bid to reverse the fortunes of the ailing diet segment.

However, despite the success in Argentina and Chile, Coca-Cola Life, which has two-thirds the calories in regular Coke, could fail to make an impact in the U.S. This is primarily due to the bitter aftertastes associated with stevia-sweetened drinks. Last month, Coca-Cola introduced a lower calorie version of its still water brand Glaceau Vitaminwater, which contains a stevia-sugar mix instead of the previously used fructose-sugar combination. This move came as Coca-Cola looks to reduce the sugar and calorie content in Vitaminwater, which was hit with a law suit in 2009 for allegedly presenting itself as a healthier drink that it really was. However, following the launch of the lower calorie Vitaminwater, avid consumers took to social media sites and other public forums to complain about the ill-taste of their favored water brand. ^[3]

Within a couple of months of its launch, the stevia-sweetened Vitaminwater has faced widespread criticism, with customers pushing for the return of the old fructose-flavored Vitaminwater. Glaceau Vitaminwater’s market share in the U.S. still bottled water category fell from 9.6% in 2012 to 6.8% in 2013, with dollar sales of $630 million last year. ^{[4] [5]} With the falling demand for the revamped Vitaminwater, sales for the water brand could further decline in the U.S. In addition, seeing how consumer response to the stevia-sweetened water drink has been negative, Coca-Cola Life might also face a similar ordeal following its launch. However, consumer perception regarding stevia in a water brand could be contrasting to the perception of stevia in a fizzy drink.

Coca-Cola Could Use Reb M To Solve The Bitter-Aftertaste Problem

In December, the U.S. Food and Drug Administration (FDA) had given approval to the use of the stevia plant extract Reb M made by PureCircle, a leading supplier of stevia products, as a general-purpose sweetener. ^[6] Coca-Cola has a five-year supply agreement with PureCircle for the development of sugar variants and other ingredients. Bitter aftertastes has been the main criticism associated with stevia derivatives, especially Reb A that is used in most stevia-fueled drinks. According to PureCircle, Reb M bears a taste more similar to table sugar than any other stevia product, and can be used to substitute sugar in high calorie foods and beverages without much alteration in taste. Although consumers seem to have rejected stevia in the water brand Vitaminwater, stevia and in particular Reb M might not significantly alter the taste of the cola based fizzy drink Coca-Cola Life.

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1. U.S. LRB market remained flat in 2013 [↩]
2. CSD declines worsen, cspnet.com [↩]
3. Vitaminwater fans hate the new vitaminwater, June 2014, businessweek.com [↩]
4. Market share of bottled still water brands in the US, statista.com [↩]
5. Sales of still water brands in the U.S., statista.com [↩]
6. PureCircle: next generation Reb D and Reb X stevia sweeteners ready for commercialization in 2014, foodnavigator-usa.com [↩]