Why Is PepsiCo Bringing Crystal Pepsi Back?

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Recently PepsiCo (NYSE:PEP) announced that Crystal Pepsi, its iconic 90s clear cola, will be available for limited time in the summer across U.S. and Canada. Along with this launch, the company also plans to release “The Crystal Pepsi Trail”, an online version of its popular 90s computer game “The Oregon Trail”. This is the second limited launch of Crystal Pepsi after it was offered for a limited time in the U.S.,  through sweepstakes on the Pepsi Pass app in December 2015.  As soda consumption witnesses a decline in the U.S., PepsiCo is aggressively looking at making changes to its products to adapt to changing consumer preferences. The revival of Crystal Pepsi appears to be a move to test consumer preferences for clear soda that is considered to be healthier compared to dark cola beverages. Should it be a success, it might eventually lead to the permanent reintroduction of this drink in the market.

Increasing “Healthier” Drinks In Its Product Portfolio

In recent quarters, PepsiCo has been looking to increase the number of “healthy” drinks in its portfolio, as consumers increasingly move away from carbonated soft drinks. While Crystal Pepsi is a carbonated drink, it is considered as a clear soda to be healthier compared to dark soda. Those seeking healthy beverages, however, are more likely to prefer fruit juices.  Consumers who have a preference for soda, but prefer avoiding the additives in dark soda, could drive the demand for Crystal Pepsi. While this product did not succeed when it was launched in the 90s, its reintroduction this time could bring back the nostalgia factor for its followers.  To introduce a “healthier” soda to the younger generation could work in PepsiCo’s favor.

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While its snacks division is PepsiCo’s most valuable segment, according to our estimates, the soft drinks segment accounts for around an estimated 15% of its valuation We expect a gradual increase in the global carbonated soft drinks market over our forecast period from $ 39.5 billion to around $ 41.5 billion, driven primarily by emerging markets.

As per our estimates, PepsiCo’s market share in this segment will remain stable around 20% over our forecast period.

PepsiCo’s loyal customer base is a key factor for the company to maintain its market share. While its presence in emerging markets (where the growth in carbonated soft drinks is likely to come from in future) is lower compared to competitors, the company is taking several initiatives to maintain its U.S. market share.  Crystal Pepsi appears to be one such initiative, one that can appeal to the older generation for its nostalgia value and to the younger generation for its “healthier” leanings.

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