Diet CSDs Outpace Regulars.
Coke Plans Diet Coke With Lime Next Year.
More New Products -- Including Mid-Calorie -- Ahead. Diet Coke Bigger Than Coke Classic Someday?

With diet CSDs way outpacing regulars in both supermarkets and C-stores (see C-store data in table), several top CSD executives begin speculating on "paradigm"-type changes ahead for industry in U.S. One senior executive says CSD companies must capitalize even more on diets. He suggests (perhaps metaphorically): "In 15 or 20 years, don't be surprised if Diet Coke is bigger than Coke Classic (in U.S.)." Last year in BD/Maxwell all-channel data, Diet Coke's volume was 905 mil cases vs Coke Classic's 1.9 bil cases. Over period 1998-2002, Coke Classic is down -4.4%, while Diet Coke is up +6.3%. Pepsi is down -9.4%, while Diet Pepsi is up +4.3%.

Ahead; new products; new Coke offering. In recent talks with senior CSD/ingredient executives, several themes emerge. One is growing concern over so-called obesity issue and their realization that diets could be key asset. Other is that more innovation/focus/display/marketing/promotions need to be behind diet and low-calorie products. Coke now plans introduction early next year of another Diet Coke extension: Diet Coke With Lime. Plus. Several executives also cite likelihood in future of mid-calorie or reduced calorie products from big beverage companies, using hybrid sweetener systems. Senior ingredient company executive says major beverage companies will be selling "mid-calorie beverages within a year." One Coke system executive notes Swerve dairy drink has far fewer calories than its Slap predecessor due to use of sucralose/HFCS blend. In Australia, Coke now sells product called "Frutonic." It is "lightly carbonated juice water" with 12.5% juice; sweetened with blend of neotame and sugar. 330-ml bottle (about 11 oz) contains 66 calories.

C-store data. In U.S. C-stores, diet CSDs out-perform regular CSDs dramatically; data covers YTD through mid-July. CSD category up +3.2% overall, but diet volume up +7.5% compared to +2.1% for regular brands (table). Diets gain +0.8 share point, as regular share drops -0.8 vs same period last year. Cases. While diet volume performance is far stronger than regular brands, regulars still gain more cases overall. Taken together, all regular brands gain 4.4 mil incremental 288-oz cases while diets gain 3.7 mil. However, regular brands account for 80% of C-store volume with diets at just 20%. [Note: regular brands account for about 70% of volume in supermarkets.]

Top diet brands. Table shows select regular and diet brands in C-stores, their shares of overall CSD category, share changes and volume performance. These top diet brands account for 80% of C-store diet volume. Other big diet brand -- Diet Vanilla Coke -- holds 0.5 share of category or 2.5 share of diet segment; product introduced late 2002.

Details. In every case, diet version of top brand out-performed regular. And in most cases, regular lost share, while diet gained share. Diet Coke (which does not include Diet Coke With Lemon) and Diet Pepsi post share gains. Both out-pace overall CSD growth rate. 7UP. Brand's performance this year is atypical, because much of its volume changed bottling systems, e.g., from Pepsi to independent. But 7UP follows trend. Regular down -20.1%; diet down -9.1%.