U.S. Markets open in 8 hrs 58 mins

Pepsi Next Hits Shelves in March

Zacks Equity Research

Recently, PepsiCo International (PEP) has announced that its mid calorie drink, Pepsi Next, will hit shelves by the end of March.

In tune with the popularity of low-calorie products, PepsiCo had unveiled its plans to launch a mid-calorie drink ‘Pepsi Next’ during November 2011.

Pepsi Next has been designed to contain 60% less sugar, 60% less calories, and will be tested in two new markets from next July.

Additionally, the retail giant had applied for trademarks of two more new-mid calorie drinks along with Pepsi Next, namely Mountain Dew Next and Sierra Mist Next.

Management has revealed that the mid-calorie drinks have been formulated to bind the consumers into the cola franchise. This move came after people abstained themselves from drinking cola as they are worried about high sugar and calorie content in the drinks. Reportedly, colas now account for about 55% of carbonated soft drink consumption, down from 65% in 1995.

Pepsi had tried its hands on mid-calorie drinks earlier, but the company’s initiatives were not much of a success. These initiatives include Pepsi XL, containing 50% less sugar, launched in the 1990s, and Pepsi Edge, a 70%-calorie soda, launched in 2004.

However, management feels that nowadays the trends have changed and the drinks with lower calories enjoy higher demand than before. Moreover, management also cited that consumers had to previously choose between zero calories or full calorie, and there was nothing in between. Besides, Pepsi Next will be sweetened by four artificial sweeteners as it tries not to compromise on taste.

The beverage giant has also modified its other drink variants to accommodate the healthy choices of its customers. Gatorade now offers "G2" containing 20 calories, which is little less than half the calories of the original version. Tropicana also introduced "Trop50," which contains half of 110 calories present in a regular 8-ounce glass of orange juice.

Pepsi’s rival Coca Cola Company (KO) had also tried to entice customers by its low calorie drinks, which were of no success. The low-calorie drinks, Coke C2 and Coke Zero, failed to create much hype in the market.

However, Dr Pepper Snapple Group Inc. (DPS) also went low calorie by introducing its Dr Pepper Ten. The new drink has sugar and does not compromise on taste unlike its diet soft drink. The sale from the new coke helped to boost its fourth-quarter sales.

Currently, we prefer to be Neutral on Pepsi’s stock. Furthermore, Pepsi holds a Zacks #4 Rank, which translates into a short-term Sell rating.

Read the Full Research Report on PEP

Read the Full Research Report on KO

Read the Full Research Report on DPS

Zacks Investment Research

More From Zacks.com