Still sweet: the rise of the mid-calorie soft drink market

There’s only so much you can do with a soft drink recipe. While carbonated beverages dominate in terms of market size, they accounted for only 14% of global new product activity in soft drinks in 2012, according to Innova Market Insights.

While fruit and juice drinks have plenty of room to move when it comes to innovation, carbonated beverages have relatively limited innovation opportunities. The world tends to look to the US for new carbonated beverage product development, given that it has the largest carbonated soft drinks market in the world, as well as the highest per capita consumption levels.

“As a result, product development tends to be led from there,” said Lu Ann Williams, Research Manager at Innova Market Insights. “Although the very concentrated nature of the market, with the top three players accounting for 90% of sales, has served to limit innovation in some instances. This has also tended to stifle the development of new players and brands.”

Consumers’ increasing interest in healthy options has opened up new directions for carbonated beverages, with 17.5% of global launches using low-calorie and reduced sugar claims. This figure reaches almost 25% in the US and western Europe, but falls to 11% in Asia.

What's next?

Another recent trend is that of mid-calorie products. These are pitched as having all the taste of full-sugar products, but with the health benefits of low-sugar products. PepsiCo has led the concept in the US with its Pepsi Next cola. It has 60% fewer calories than regular Pepsi and is sweetened with a blend of high-fructose corn syrup (HFCS), aspartame, acesulfame-K and sucralose.

What’s especially interesting about Pepsi Next is that it was launched in Australia using a stevia formulation, rather than a stevia and artificial sweetener blend, that gives a 30% sugar reduction, rather than the 60% reduction launched in the US. Given that Australia’s obesity crisis is virtually on par with America’s, this disparity seems odd.

There’s no doubt that Pepsi would have made this decision based on extensive market research, so what does this say about the Australian market? Are we yet to embrace the low-calorie trend in the same way as our American counterparts? Or is our awareness of our obesity epidemic yet to catch up with the truth of the situation?

The mid-calorie bandwagon

The US’s other two major carbonated beverages players - Coca-Cola and Dr Pepper - have also jumped on the mid-calorie bandwagon, suggesting that these companies also see value in launching mid-calorie lines. Coca-Cola developed and tested its own mid-calorie carbonates range in 2012 using the Select sub-brand for Fanta and Sprite products. The sub-brand claims a 50% calorie reduction on standard lines, with beverages featuring natural sweeteners such as sugar, stevia and erythritol.

Dr Pepper Snapple has been developing its Dr Pepper Ten concept, a 10-calorie carbonate with ‘macho marketing’ aimed at 25- to 34-year-old men, which hopes to ditch the diet image - perhaps in the same way that mid-strength beer hoped to shake off an association with light beer in Australia.

Dr Pepper Ten was launched in 2011 and was closely followed by the launch of 7 Up Ten, A&W Ten, Sunkist Ten, Canada Dry Ten and RC Ten in January 2013. These launches all feature both caloric and non-caloric sweeteners: HFCS, aspartame and acesulfame-K. Containing just 10 calories, they fall in between both the traditional diet soft drink and mid-calorie categories.

While mid-calorie carbonated beverages might seem to open up a whole new category, Williams warns that it might be a bit too good to be true. “They may not have widespread consumer appeal, may confuse consumers with a raft of different calorie levels, sweeteners and positionings and may, in any case, cannibalise sales of existing full- and low-calorie lines,” Williams said.