Special Issue: Pepsi Will Introduce Mid-Cal Cola: 'Pepsi Edge.'

Sets Launch of New Cola With 50% Calorie and Carbohydrate Reduction. Executive Says New Product's Taste Profile Will Be 'Similar' to Brand Pepsi.

Pepsi announces new product: mid-calorie cola, "Pepsi Edge." Mid-calorie CSDs from Pepsi, Coke and Cadbury have been expected (BD2/6/04). Pepsi is first to announce actual product introduction. Coke has tested mid-calorie cola under project name "Coke Ultra" (BD1/23/04). Coke system executive says it's "highly likely" company will introduce mid-cal cola this year. Cadbury is mulling introduction of cherry-vanilla flavored mid-cal version of Dr Pepper; also mid-cal version of 7UP.

Pepsi Edge details. Product has 50% less "sugar, carbs and calories" than regular colas, says Pepsi. Will be launched nationally late summer in all channels/packages. Pepsi Edge is sweetened with blend of sucralose and high fructose corn sweetener (HFCS). Will likely be line-priced with other CSD products. Product announced as Pepsi bottlers convene in Las Vegas for their annual meeting. Company says launch will be "supported by full slate of advertising, marketing and in-store activity typical for a national product launch from Pepsi."

Plus. Pepsi says it has been testing product "over the past several months." Says research shows 60 mil consumers are dual-users of regular and diet CSDs. Adds in last two years, number of dual-users has grown +75%. Pepsi says new product has "high taste-test scores."

Interview. BD talks to Ahad Afride, vp innovation Pepsi North America. Taste profile; similar to Pepsi? "Yes, the profile is similar to brand Pepsi. You can't replicate the taste of Pepsi ... This tries to get as close as it can."

Thoughts behind product? "We know diets appeal to a certain group of consumers, they like the taste and they love Diet Pepsi. There are others who love regular Pepsi. What we're finding is there are more people who start bouncing around between both of them. This is an opportunity for those consumers who are trying to balance both of them ... For consumers who want it all, this will appeal to them." Adds: "There is a group of regular cola users who are drinking regular colas less and drinking other beverages (than diet CSDs), and we think this could appeal to some of those."

Cannibalization? Pepsi? Diet Pepsi? "We haven't done any source of volume testing that would tell us where it's going to come from ... The focus needs to be on incrementality."

Context; views. In recent years, carbohydrates/calories/weight-watching have grown as consumer issues. As BD has previously reported (BD 2/6/04), one theory behind mid-cals is to market product that tries to keep certain consumers drinking CSDs. Industry executives suggest some consumers who stop drinking -- or reduce consumption of -- regulars do not stick with diets for taste reasons. So mid-cal CSDs with taste profiles similar to regulars and fewer calories might appeal to them. Mid-cal issue: can mid-cals offer enough calorie reduction without major taste sacrifice? Morgan Stanley beverage analyst Bill Pecoriello: "The idea is to keep regular cola drinkers in the category instead of switching to other beverage alternatives. The key is taste, as regular cola drinkers are unlikely to sacrifice taste for 50% fewer calories." Appearing to address this issue square-on, Pepsi statement notes Pepsi Edge "provides the perfect balance of taste and calories." Plus. Goldman Sachs' Marc Cohen: "This is a really provocative answer to the defection of people from regular CSDs." Adds: "The issues are incrementality and taste."

Pepsi mid-cals. Nearly 10 years ago, in 1995, Pepsi tested Pepsi XL mid-cal cola in Florida (BD 3/17/95). It was sweetened with HFCS and aspartame; contained 70 calories per 12-oz can vs regular Pepsi's 150 calories per can. Product test ended without broader launch. Before that, in 1975, company launched Pepsi Light, half-calorie/lemon-flavored cola. Product was in-market for several years. Pepsi Light was sweetened with sugar/saccharine. Both these brands might be considered "ahead of their time," in words of one observer, as obesity/calorie/carbohydrate issue was not then what it is now. Canada. Pepsi formerly sold Pepsi Max mid-calorie cola in Canada (BD 12/10/93); discontinued in 2002.

Coke. Asked about Coke's plans, company executive says: "The secret formula is execution. We're focused on executing against our plan flawlessly, and if you want a great-tasting no-carb soft drink, we've got Diet Coke." However, as stated above, chances are extremely high Coke will introduce its own mid-cal cola later this year.