It could have been a moment of triumph for Pepsico. It wound up being a disaster.
A year after the soda company announced it was taking the artificial sweetener aspartame out of Diet Pepsi and replacing it with sucralose, it is now back-pedaling. Amid slumping soda sales industry-wide, the recipe change seems to have alienated (paywall) the Diet Pepsi devotees who liked the drink the way it was.
Aspartame will be back on the ingredient list and back on store shelves starting in September.
The switch was supposed to be a big moment for Diet Pepsi. Consumers had responded well to other food companies that removed artificial flavors and ingredients from their products, and with the Coca-Cola Company refusing to ditch aspartame from Diet Coke, Pepsico was hoping for some good publicity.
What it got was disappointment.
Investors questioned Pepsico CEO Indra Nooyi about Diet Pepsi sales during an investor call in October 2015, a month after the reformulation announcement. At the time, Nooyi deflected.
“Our belief is that you’ve got to wait a few cycles to see what the purchase repeat adoption cycle is,” she said.
Eight months after that call it had become clear to the company that, not only was the switch to aspartame unpopular, it was driving some Pepsi drinkers away. Diet Pepsi sales slumped by more than 10% in the first quarter of this year, compared to the nearly 6% fall suffered by Diet Coke, according to Beverage Digest. At the same time, newer evidence contradicted previous science that listed the sweetener as dangerous to human health. Even the 2015 dietary guidelines of the US deemed aspartame safe.
The reversal by Pepsico might vindicate the decision by Coca-Cola to keep aspartame, but it’s a hollow victory for Coke, in the face of the larger decline in consumption. Diet soda drinks—and soda consumption, in general—have been on the decline for years in the US.
In April, Pepsico CEO Nooyi told investors that just 12% of revenue earned by Pepsico’s North American beverage sector comes from its namesake soft drink. The rest comes from a non-soda drinks, including the company’s Lipton tea products, which grew by 10% during the first quarter, and Naked Juice, which grew 60%.
Even bottled water sales have now caught up to soda, a signal that soda companies will have to do some creative thinking to find a way out of their sugary slump.