PepsiCo Announces Pepsi Next to Tap Health Conscious Soda Market

November 25th, 2011 by Trefis Team
+1.38%
Upside
68.00
Market
68.94
Trefis
PEP
PepsiCo
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With more people ditching drinks and food deemed unhealthy, soda sales have been hurt by consumer concerns over excessive sugar and calories. Drink makers have long struggled to find a low calorie drink whose taste has resonated well with the consumers. PepsiCo (NYSE:PEP) is now going to launch Pepsi Next, after the company said that the testing results exceeded its expectations. Pepsi Next has 60 percent fewer calories than regular Pepsi, with 40 calories per 8-oz serving and 60 calories per 12-oz serving and hopes to take on Coca Cola’s (NYSE:KO) success with Diet Coke and Coke Zero.  [1]

We maintain a price estimate of $71, which is more than 10% above the current market price

See our complete analysis for PepsiCo stock here

We believe that Pepsi and Diet Pepsi combined represent a little more than 10% of the stock, so the move shouldn’t have a significant impact on the stock price even if successful. However, it could help eat up Coca Cola’s (NYSE:KO) soda market share as more consumers choose to opt for health over taste.
India Products set to get healthier

On the other hand, the company is following a two pronged strategy in India , in order to improve its image as a non-healthy brand. The company is launching more baked and low fat snacks such as Aliva. At the same time, the company is looking to reduce sugar and calorie contents in the existing portfolio of products. [2]
All in all, PepsiCo’s increasing its worldwide presence by increasing the choice for consumers and offering healthier and low calorie alternatives. The company seems to be aligning itself with the changes in the lifestyle and consumption pattern of the people and we maintain a price estimate of $71 for PepsiCo.

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Notes:
  1. PepsiCo to launch mid calorie soda nationally, Businessweek, November 16th, 2011 [↩]
  2. PepsiCo looks to increase health foods, drinks portfolio, The Economic Times, November 17th, 2011 [↩]
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